Sunday, December 05, 2010
Know Your VIX
The recent sell down owing to the Irish, Spanish and Portugal problems may have been magnified. Throw in the Chinese threat to tighten liquidity and raise rates there. A better way to get a grasp of how perilous or in danger the markets were of "skidding off the slope".
We should monitor the VIX closely to get a sense of how bad things really are. The recent sell down did not even caused the VIX to break 25 on the upside. I have stated before that 30 is key level, if breached on the upside, time to sell off all shares. Otherwise, it would be "OK to buy on dips".
The way the VIX closed over the last 2 days would indicate a firm upswing for most equity market in the near term.