The CBOE Volatility index, known by its ticker symbol, VIX, is a popular metric used to estimate the level of implied volatility for S&P 500 index options. The value derived in this asset exists through an estimation of this implied volatility over the next 30 days. When the value of the VIX is raised, this translates to a more volatile underlying market (S&P 500), and vice versa. In October and November of last year, the VIX peaked above 80, which the VIX is currently trading at 22.41. This value is nearly equivalent to pre-2008 market crash levels.
Relating to this, there is a well written article in Barron’s that claims that current implied volatility levels do not accurately reflect the fundamentals of current market conditions. (http://online.barrons.com/article/SB125846366940352017.html) I would have to agree with the author for the following reasons. Times have been cheery for investors over the last six months, and the S&P 500 alone has gained a solid 25.76% over this time period. Although economic indicators such as unemployment, consumer confidence, housing data, and GDP growth remain less than encouraging, the equity markets have in many ways over-extended itself in terms of anticipating recovery. However, the VIX itself hardly provides any pessimism through its underlying value.
One last interesting area of activity regarding the VIX can be seen through VIX options. Calls have become increasingly more expensive as of late, and trade volume of this derivative has been steadily increasing. This portrays that many traders are anticipating that volatile times lie ahead.
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Technical analysis cannot account for the most part for the unexpected sudden death or illness of a guy like steve jobs. A sudden unexpected major lawsuit against a company. Even a unexpected earnings suprise on the downside..What about a takover offer for a company that nobody was expecting. I have nothing against technical analysis Although I remain skeptical about it but I do find it interesting to listen or read about it. I am at heart a fundalmentist when it comes to investing because I believe that invariably and in the end a companies stock price must at some point reflect the performance of the company. Their many stocks that have increased tremendously in value apple computer traded at just 5 dollars in 1998 today its around 400 dollars also petsmart stock traded at just 2 dollars in the year 2000 now its trading around 50 dollars a share theirs many other stocks but to many to list here. So you can still make lots of money buying and holding if you choose the right stocks
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