VIX, the S&P 500 Volatility Index, also known as the “fear index,” and VIX ETFs spike higher as U.S. equity markets swoon.
VIX jumped 5.8% this week as major U.S. stock indexes declined 2% on average in response to the post-election analysis of President Obama’s reelection, the approaching “fiscal cliff” and ongoing uncertainty in Europe. ETFs, Stocks Face Fiscal Cliff, Apple Bear and More
Stock indexes broke significant support levels with all three major indexes, the Dow Jones Industrial Average (DIA) the S&P 500 (SPY) Russell 2000 (IWM) and Nasdaq 100 (QQQ) all closing below their 200 day moving averages, the line widely watched as the demarcation between bull and bear markets.
The potential for lower stock prices points to higher VIX and VIX ETF prices ahead.
For the week, VIX climbed 5.8% and the most popular VIX ETN, iPath S&P 500 VIX Short Term Futures ETN (VXX) climbed 6.4%.
chart courtesy of StockCharts.com
In the chart of VIX, we can see how the index has popped above both its 50 and 200 day moving averages which puts it in a bullish configuration. Also momentum and relative strength are positive, adding to the bullish picture.