Is The VIX Saying Be Scared?

August 5, 2014 12:23 PM

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Is The VIX Saying Be Scared?

We are in the heart of the three most bullish months for the VIX and 2014 isn’t disappointing so far.  

I noted at the start of July that July was the most bullish month for the VIX historically.  It played out perfectly, as it soared +46.50% - the 7th largest monthly move since 1990!  

I’ve long been a guy who said the VIX is a mean-reverting instrument. Meaning, if it goes up a lot, it’ll eventually come back down and vice-versa.  Well, look at what has happened after some of the largest monthly VIX spikes ever.  The top 20 monthly surges ever pulled back just 1.19% that following month.  Didn’t expect this one, as more of a pullback was my guess.  

I’ll be the first to admit, just yesterday I noted how VIX futures became inverted and how this had been very bullish for the SPX in the near-term.  My big caveat was if it didn’t work fast, be very careful.  Well, so far we aren’t seeing any type of a meaningful bounce.  Then, considering the fact that the VIX doesn’t pullback much at all after huge monthly surges and we’re still in the heart of a very bullish time seasonally for the VIX, be open to higher volatility and a potentially lower market here.  Risk is much higher now, be aware.  

Thanks for reading.   

Photo thanks to Dan Anderson.

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