Financial market volatility, as measured by VIX, reached its lowest point in two-and-a-half years on Friday.
Stocks usually perform better in low volatility environment and volatility usually moves up when participants panic.
However, this time around analysts are not too sure whether this low level volatility is an indication of further breakout or collapse in the coming days.
Chicago Board Options Exchange volatility index (CBOE VIX), closed at 11.95 on Friday night, lowest level since December 5, 2012.
Analysis -
- For the past 25 years. Average VIX has been 19.8.
- About 83% of the time in last 25 years, VIX has oscillated between 30 and 12.
- About 9% of the trading days, VIX has closed above 30.
- About 8% of trading days, VIX has closed below 12.
Which means that Friday's close pretty special in terms of rarity.
It can be said, that VIX is unlikely to stay at such low levels for very long so a mean reversion is likely, which means a correction in S&P.
VIX staying at such low levels for long has seen crisis following, like what happened in 2008/09.


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