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Saturday, September 17, 2022

Market Update 9/7/22 - Why is the $VIX so low?

 Why is the $VIX so low? 

This question seems to be getting asked a lot, lately, and the answers I'm seeing, that are being given by the so called "experts", just don't jive.

The first thing the so called experts like to claim, is that, "The $VIX isn't a fear gauge". 

While technically true, the $VIX wasn't created to be, nor is it advertised as, a "fear gauge". 

See the short video clip provided by the cboe: Making Sense of the VIX Index

What the $VIX actually measures is implied volatility, as expressed by options buying on the $SPX. That's what actually moves the $VIX. 

You've all heard that, "the market doesn't like uncertainty", well...   

  • When uncertainty (fear) is high, investors load up on PUT options.

  • When uncertainty (fear) is low, then investors will buy Call options. 

In short, the $VIX is actually a measure of uncertainty (fear) in the market.  

Fact checking the so called experts claims that the $VIX isn't a fear gauge: FALSE    

Taking a look at the current $VIX in today's market environment 

Although the $VIX trading at 26 isn't historically "low", by any sense of the word, as traders, we recognize that the $VIX is not spiking higher, as it usually does, in a broad market sell-off. 
Why is this, and why are the experts doing everything in their power, to lie about it?  

The main reason - as far as I can tell - is that this simply isn't a broad market sell-off,
 The market breadth doesn't point to a shakeout across the board, but more of a re-balancing, as we trade into the second half of the year. 

Certain sectors are selling off, and certain sectors aren't: 

Thursday we actually saw financials up, and yesterday (Options Expiration) Friday, the semiconductor sector actually ended up slightly. While we did see a little shakeout in the energy sector, that sector is not heavily weighted, and doesn't affect the $VIX much. We saw the Russell 2000 down quite a bit, but again the $VIX which correlates with the Russell (the $RVX), was only up 1%.   

The experts, most of whom work for one hedge fund or another, don't want to let on to what's really going on, because these are the folks who move markets. These are the money managers, and the market movers, and they don't want to show their hand. They are in the business of making money, and that doesn't necessarily mean, making you money, so be careful who you trust!     

Only trust the $VIX, not what you see being reported by the financial fake news. When the market is bracing itself for a correction, as it was in the beginning of the year, when the $VIX traded straight to 38.94, but ever since then, the $VIX has continued it's descent. Even as the main stream media reports a war with Russia, and the threat that the fed is going to cause a hard landing, or a "recession".   

I've written plenty more on the $VIX in the past, including my guide to using the $VIX as a trade indicator in March of 2015. Wow, has it been this long, I've been charting the $VIX?! No wonder I'm an expert at it! 

See my free article: TRADING THE $VIX 

I've even updated the linked $VIX article, and fixed all the typos, I found from the last update in 2018. 

Take Care, AA 

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