Monday, August 8, 2011 1:42 PM – Correction on Fear Indicator (VIX)

In my last post I gave credit to spikes above 40 in the VIX, popularly known as the fear indicator or volatility index for accurately predicting 3 of the last 5 market bottoms almost to the very day. That is accurate.

On the other two occasions, 2001 and 2008 I said it missed because that was not the market bottom. While that is also true, in both cases that spike was followed immediately by 15-17% rallies. So actually, in the last 25 years the VIX has been a perfect indicator of significant rallies. The VIX is currently 38.9.