An Impending Economic And Financial Disaster

investmentresearchdynamics.com / Dave Kranzler / May 14, 2017

You’ve probably heard/read a lot lately about the VIX index. The VIX index is a measure of the implied volatility of SP 500 index options. The VIX is popularly known as a market “fear” index. The concept underlying the VIX is that it measures the theoretical expected annualized change in the SP 500 over the next year. It’s measured in percentage terms. A VIX reading of 10 would imply an expectation that the SP 500 could move up or down 10% or less over the next year with a 68% degree of probability. The calculation for the VIX is complicated but it basically “extracts” the implied volatility from all out of the money current-month and next month put and call options on the SPX.

The graph above plots the SP 500 (candles) vs. the VIX (blue line) on a monthly basis going back to 2001. As you can see, the last time the VIX trended sideways around the 11 level was from 2005 to early 2007. On Monday (May 8) the VIX traded below 10. The last time it closed below 10 was February 2007. The VIX often functions as

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