In yesterday’s DecisionPoint Trading Room (airs 3p ET), Carl took a close look at the VIX over the years. We discussed last week in our DecisionPoint Alert subscriber blog that sentiment simply wasn’t THAT bearish yet. This chart really reflects what we’re talking about.
The VIX is often considered a “fear gauge”, telling us how “fearful” market participants are. The higher the reading, the more fearful. We would draw your attention to the readings that occurred during the last 25 years. Notice that readings were exceedingly high at the end of the Financial Crisis and COVID-19 bear markets. Readings after 9/11 were much higher than now. There are VIX spikes during deep declines in 2010, 2011, 2015 and 2018. Those readings are still MUCH higher than what we have now. Readings today are insignificant in comparison.
Conclusion: We shouldn’t expect market pivot points based on sentiment until readings are “off the charts”.
Technical Analysis is a windsock, not a crystal ball. –Carl Swenlin
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Erin Swenlin is a co-founder of the DecisionPoint.com website along with her father, Carl Swenlin. She launched the DecisionPoint daily blog in 2009 alongside Carl and now serves as a consulting technical analyst and blog contributor at StockCharts.com. Erin is an active Member of the CMT Association. She holds a Master’s degree in Information Resource Management from the Air Force Institute of Technology as well as a Bachelor’s degree in Mathematics from the University of Southern California.