Volatility Sleeps, Risk Doesn’t

Volatility Sleeps, Risk Doesn’t

Higher stock prices (NYSEARCA:DIA) have kept a lid on stock market volatility.

The S&P 500 volatility index (ChicagoOptions:^VIX), also known as the “fear index,” has now fallen around 17% over the past month and is back below its 200-day moving average. Does the stock market’s general lack of fear mean that volatility has reached a permanently low plateau?

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Since September 2014, each time the VIX (NYSEARCA:VXX) dipped below its 200-DMA it’s led to the following spikes:

+24%
+171%
+27%
+23%
+118%
+62%

VIX 2.25.155

For now, all is safe and calm in the worry-free U.S. equity market (NYSEARCA:IWV). That’s of course until the unexpected moment when it’s suddenly not.

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