BE CAREFUL: What is happending with the Vix? 4-26-07

The VIX index represents the volatility in the market. Typically, the VIX and the Equity market has an inverse relationship. As the markets go up, the VIX goes down and vice versa. However, as the Dow reached 13k and the S&P is reaching the 2000 high of 1500, the VIX is increasing. This is a sign to be very CAREFUL. This is the second blog entry in the last couple of days warning people to be very careful due to a market correction “around the corner”.
Our trading strategies is based on equilibrium. Right now, the VIX and the Equity market are not in equilibrium. Something will have to change very soon in order to reach this equilibrium. Either the market will correct so the VIX represents the volatility in the market or the VIX goes down as the markets move up.
Please see chart below.
spx_vix.JPG
For EDUCATIONAL USE.    Commodity Futures Trading Commission, Forex, Futures, Equity and options trading has large potential rewards, but also large potential risk and may not be suitable for everyone. You must be aware of the risks and be willing to accept them in order to invest in these markets. Do not trade with money you can not afford to lose. This is neither a solicitation nor an offer to Buy/Sell. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this document. The past performance of any trading system or methodology is not necessarily indicative of future results. All information provide d on the Blog is for educational purpose .

About the Author Manesh Patel