VIX drops as stocks close near highs

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The equity indexes closed at their session highs yesterday as the CBOE Volatility Index tumbled.

The S&P 500 closed just above 1440, gaining 11.50 points, or 0.8 percent. It whipped in and out of positive territory in the morning before running higher into midday trading and again into the close. Resistance is now at 1448 and support at 1418.

The Nasdaq 100 had the same pattern, gaining just shy of 20 points to close at 2739.88. Resistance is remains at 2780 and support at 2660.

The Russell 2000 was up 5.19 points to close at 828.28. Unlike the other indexes, however, the small-cap RUT didn't make up for Friday's losses. It still has resistance at 846 and support at 808.

The VIX dropped 0.87 points, or 5.4 percent, to 15.27. It had climbed as high as 16.21 in the morning, then slid lower the rest of the day.

The VIX futures were all lower as well. The October contracts have only one trading day left before settlement and were down 1 point, or 6 percent, to 15.65. The November futures lost 0.85 to close at 17.15. Those who are saying there is no fear in the market are not looking at the VIX premium to the actual volatility, which is below 8 percent for the SPXt.

More than 616,000 VIX options traded yesterday, led by 500,000 calls. The SPX options changed hands more than 520,000 times, with 315,000 puts. Despite the drop in the VIX and its futures, the VVIX--the volatility index of the VIX options--was up 1.1 percent to 92.92, showing demand for those options.

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