Falling Volatility

A lot of economic data coming from the US today. Producer price index coming at 1.7% vs. 0.8% consensus on the monthly level and -4.3% vs. -5.3% consensus on year level. Surprise to the positive side. Retail sales were up 2.7% vs. 1.9% consensus in August, taking out Autos and Gas +0.6%. Also, positive, but definitely not breath taking.

Volatility measured by VIX Index has fallen to the lowest level this year, all dough still at historically elevated levels. Average daily change in the S&P 500 has reached lowest level in almost in year and half.  Bespoke Investment Group link: Average Daily Change Plummets. This suggest that VIX derived from the historical volatility would be something like 15.  A historical average. At the same time we have short interest falling to the lowest level in almost 2.5 years. Bespoke Investment Group link:  Short Interest At Lowest Level Since February 2007. So we have lack of bearish positions and falling volatility (both implied and historical). Stars aligning for potential breakout to the negative side..

VIX 15092009

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This entry was posted on Tuesday, September 15th, 2009 at 9:15 am and is filed under Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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