A popular gauge of expected volatility may be signaling that the stock market’s bounce off the October lows is running out of room, according to a closely followed Wall Street analyst.
Colas... A popular gauge of expected volatility may be signaling that the stock market’s bounce off the October lows is running out of room, according to a closely followed Wall Street analyst. Colas said the chart below, tracking year-to-date activity, “shows why we get worried about U.S. equities once the VIX breaks 24 to the downside and starts to edge its way down to 20.” The red line tracks the S&P 500 SPX , and the black dotted line is a reading of the VIX that’s been inverted to make its correlation with the S&P 500 easier to visualize.
Stock-index futures pointed slightly lower early Monday. Major indexes posted a weekly decline on Friday, leaving the S&P 500 up nearly 11% from a nearly 2-year low finish set on Oct. 12. It remains down 16.8% in the year to date. The Dow Jones Industrial Average DJIA is up more than 17% from its Sept. 30 closing low, trimming its year-to-date loss to less than 8%. The Nasdaq Composite COMP is down nearly 29% for the year to date.