Bill Luby at the VIX and More blog points out that everyone's favourite fear gauge has been showing surprisingly little nervousness in recent sessions. The CBOE Volatility index edged up to 29.2 on Wednesday morning amid some concerns about the upcoming European summit, but that's still at the low end of the index's recent trading range that saw it spike to 48 in August. Indeed, things seem pretty calm right now, but are they too calm?.
Mr. Luby (via Abnormal Returns) noted on Tuesday that the index had gone five days without breaching the psychologically important level of 30 – and it has gone two months without breaking above 40. (Full disclosure: I own units in the iPath S&P 500 VIX Short-Term Futures exchange traded note.)
Maybe that's not such a big deal in normal times. But today's market backdrop hardly seems normal.
"Given all the uncertainty surrounding a group of 17 diverse actors with very different motivations arising from divergent national agendas, economic interests and domestic political situations, it is reasonable to expect the VIX and other measures of uncertainty to climb going into the end-of-week summit," he said.
David Berman