Analysts believe that the VIX has broken through the 200-day average, breaking the pattern of the last three months, and remains bullish.
The Cboe Volatility Index (VIX), known as the “Panic Index,” has risen 53% in a week, from 22.31 to 33.09. Last Wednesday (27th), it soared 61.6%, the largest single-day gain in two years. Retail investors by GameStop (GameStop) and put short hedge funds to do, triggering a large increase in trading volume.
Axi Global Chief Market Strategist Stephen Innes said: “On balance, the VIX curve is the same as it was before the U.S. presidential election in early November last year.
U.S. stock volatility has been steadily declining since April last year, and after a period of consolidation after November, it turned around with the U.S. stock market plunge last week, hitting its biggest gain in 11 months.
The U.S. stock market selloff and GameStop surge is a sharp contrast, from the Reddit community of retail investors, became the beneficiaries of the stock market shakeout.
Innes pointed out that the U.S. stocks had two major features last week, one is the legal person self-preservation “precautionary short covering parts”, and the other is deleveraging to reduce the risk, so as to form a “self-driven cycle: the more retrenchment, the more liquidity will be reduced, more people will retrench”.
The VIX, which uses the option price of the S&P 500 to measure implied volatility over the next 30 days, approached its highest level since late October last week and posted its biggest percentage gain since the end of February last year.
This index often reflects the degree of risk and doubt investors have about the broader market, so it is often seen as a pointer to panic. This sentiment was best highlighted by conditions last year, when the VIX closed at an all-Time high of 82.69 in March during the height of the New Crest Pneumonia (CCP) outbreak.
While the VIX is still well below last March’s peak, it is within striking distance of recent highs in late October, early September and mid-June,” said dailyfx.com strategist Cowley. He said the VIX has broken above its 200-day average, breaking the pattern of the last three months, and remains bullish for the rest.
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