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Can VIX Finally Break Higher?

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This article is more than 6 years old.

After a period of setting new long-term lows on an almost daily basis, VIX has finally started rising.  This morning it is approaching its 50 day and 100 day moving averages - a potential catalyst to its 200 day moving average - which is at 12.8

Bloomberg

This coincides nicely with two things

  1. The lack of hedging ahead of last Thursday's Event Risks (Comey, Draghi and May)
  2. The growing reliance on using treasuries as a hedge for equities and that strategy not working as well

On the Event Risk side, this is the first time since Brexit that making it through the Event didn't seem to force the market higher as hedges were taken off.

I also believe many investors have been joining the Risk Parity Party - directly or with 'Homebrew' strategies - neither of which are working as well now that one doesn't zig when the other zags (this morning stocks and treasures are BOTH lower - the most dangerous outcome for most Risk Parity strategies).

Yes, this dip in stocks may be bought, but in a market where Apple can drop almost 6% in a day, it is time to be cautious and ensure that liquidity is really there.

 

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