Deep Depression

By -

No, no, this isn’t about my state of mind. There’s a limit to how much I’m going to turn this website into a lifelong therapy session. I am referring to the depressed state of the VIX. I am seriously stunned just how low this thing is going. As of this composition (within the trading day on Tuesday) we have matched the levels last seen in mid-2021, which was two years ago.

I would have assumed that the last time the VIX was at this level, the market must have been making its ultimate peak, but this is not the case. I’ve tinted below the approximate times when we’ve been almost at this 13-handle, and although the price levels are almost exactly like, you can plainly see it would be nearly half a year before the market actually topped out (oddly, at a higher VIX level).

Looking at many years of VIX data, there are roughly two “states of mind” so to speak, that the market lives in. One of them, in yellow, is when there’s basically zero perceived risk, the bulls are totally in charge, and bears look like buffoons. The non-tinted portion is when the market actually acts like a two-way market, and I prefer roughly five thousand times over the other one.

So what’s next for the VIX? Do we actually get to 13? Go sub-teens? Maybe even get a single digit like back in November 2017? Search me. My self-confidence these days is already in the single digits, and I dare not venture a guess about this conundrum.