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.
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