Tuesday will mark VIX December's expiration, marking yet another volatile month. The good news is that the VIX has retreated from its mid November high of 80. Although still considered to be very high, a retreating VIX has allowed some investors with a window of buying opportunity. The bad news is that it appears that this window was not open for too Long. With the current VIX level, fear still surrounds this market. Investors are concerned about the Big 3, the implications of a new Obama Administration, and more wall st. scandals. Perhaps January's VIX will lead to more clarity.
The CBOE Correlation Index (KCJ) is close to the lowest level we have seen since it was first listed in 2007. The KCJ measures the implied movement of the S&P 500 components options, compared to the implied movement of the S&P 500 index options. Simply put, the higher the number, the more likely all stocks are going to move together. Conversely, a low number will be characterized by sector rotation, and flat markets; one sector moves higher, another moves lower. (Source: Access Hollywood) Correlation, for lack of a better term, is correlated with volatility. Not surprisingly, 30-day S&P 500 historical volatility is near the low level of 6.5%. Currently at 33.5, KCJ is sitting close to rock bottom, lower than where it was in 2007, (but not lower than where Lindsay Lohan was in 2007). So far this year, the market has been able to grind higher, characterized by leadership in FANG(Facebook Apple/Amazon, Netflix, Google) and sector rotation. A...
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