The VIX dropped below 10 and most bears are looking at it like a no-brainer shorting opportunity… well, because it just can’t go much lower. Thing is, back in the first quarter of ’08 when the VIX reached 35, the bulls thought it just couldn’t go much higher and took advantage of what also appeared to be a no-brainer on the long side. Fast forward to October of ’08 (when the VIX hit 80) and, well, you know the rest of that story. And if you think it’s different this time, go ahead and type “VIX all time low” in Google and see just how many times the market has been there/done that, and didn’t do it (A good one was a call for a crash in February of this year, and we all know how that turned out).
Bears and bulls were virtually at a stalemate on Tuesday as far as volume (HG was at zero), but a significant increase in volume overall hints that some “churning” is going on beneath the surface. So while folks continue to argue over the state of the VIX, the market’s SIDEWAYS motion may very well continue (or quietly drift higher to everyone’s dismay… everyone, that is, except for the SPY cup and handle crowd) before reaching an ultimate resolution. -MD
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