Market volatility COLLAPSED VIX closed is at lowest level since 2019
https://x.com/GameofTrades_/status/1794035650540494931
Credit risk in the US is at its lowest since 2007 This might seem positive But historically, such drops often signal that markets are becoming overly complacent
https://x.com/GameofTrades_/status/1794035652453146717
We've seen this pattern before: - Asian financial crisis in 1998 - Dot Com bubble in 2001 - Financial Crisis in 2008 Each time, low credit risk was a prelude to periods of significant financial stress
https://x.com/GameofTrades_/status/1794035654680264736
Extreme investor optimism is usually a red flag Recent surveys indicate consumer confidence in the market is at a 30-year high Could this be a warning sign?
https://x.com/GameofTrades_/status/1794035657121395024
A key indicator of market complacency is the Volatility Index (VIX) of the S&P 500 Typically, high VIX levels suggest high market fear, presenting buying opportunities
https://x.com/GameofTrades_/status/1794035659789013421
VIX is the expectation of future S&P 500 volatility based on the options market So the higher it is = more traders are hedging against market downside
https://x.com/GameofTrades_/status/1794035661739364575
Currently, the VIX indicates that future S&P 500 volatility expectations are very low This optimism has brought the VIX to its lowest in 4 years And has lead to the S&P 500 hitting new ATH
https://x.com/GameofTrades_/status/1794035663928717783
Historically, very low VIX levels have typically not been good for stock investors For instance, in 2007, low volatility coincided with the market peak before a 60% drop Same in 2014 and 2017, leading to a period of market stagnation
https://x.com/GameofTrades_/status/1794035666197897560
Yet, today’s low VIX isn't at all-time lows Throughout history, similar levels of volatility have still seen strong market performance Lasting several years
https://x.com/GameofTrades_/status/1794035668303347917
Interestingly, current volatility levels, while low, are not extreme This moderate calm could actually be beneficial for the market Contrasting with the risks associated with extremely low volatility
https://x.com/GameofTrades_/status/1794035671457247717
So, extremely low volatility is a bad thing for the market because it signals too much optimism But reasonably low levels of VIX can be positive for the markets Which is where we are today
https://x.com/GameofTrades_/status/1794035674515226928
Recent price action showed a spike in VIX in April 2023 With a 6% pullback in the S&P 500 But the VIX has come back down aggressively ever since Returning to very reasonable levels
https://x.com/GameofTrades_/status/1794035676708757544
One of the main influences on the VIX is oil prices Since early 2022, there’s been a tight correlation between oil prices and market volatility
https://x.com/GameofTrades_/status/1794035678654972074
Currently, decreasing oil prices suggest that any upcoming spikes in volatility should be short-lived And can be used a buy-the-dip opportunity
https://x.com/GameofTrades_/status/1794035680928202934
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