I came into the office this morning, and my trading desk started our week by discussing the VIX. We put this chart together comparing the "fear indicator" with the S&P500.
As the chart below shows, the recent lows have been accompanied by very large spikes in fear, as indicated by VIX.
Last week, we had a pretty big sell off — but the VIX stayed relatively modest. That implies that a firm bottom (heh) — at least one that is tradable — has yet to be made.
VIX versus SPX, 1 year
Chart via Fusion IQ, Bloomberg
If the VIX were a stock, I would be a buyer . . .
UPDATE: June 24, 2008 8:48am
John Hussman noted in his commentary yesterday, “No Capitulation” that:
“despite the recent weakness, there is a strange “orderliness” to recent market losses – as if investors are convinced that there is some invisible safety net that will keep stocks in a trading range and prevent any sustained price erosion. That complacency may become costly. Still, stocks are somewhat oversold from a very short-term perspective, so again, we can’t rule out a fast, furious spike to clear that condition."
Well said . . .
UPDATE: June 23, 2008 11:48am
I posted this before seeing Felix Salmon’s Market Mover post on the following on: Adventures in Technical Analysis, Jim Cramer Edition.
I will respond to this later this week . . .