VIX, the CBOE S&P 500 Volatility Index, the “fear index,” took a sharp plunge Thursday but rallied hard on Friday as fear and volatility re-entered U.S. stock markets.
It was a volatile week for U.S. stocks and ETFs as Hurricane Sandy ripped through New York and New Jersey and VIX, the CBOE S&P 500 Volatility Index, responded accordingly.
For the week, VIX declined 2.5% but the index saw a huge bounce on Friday with a 5.4% gain as U.S. stocks and ETFs finished the day in the red.
VIX tends to move inversely to major U.S. stock indexes like the S&P 500 (NYSEARCA:SPY) and so the index saw violent action as major indexes rallied and fell sharply.
chart courtesy of StockCharts.com
In the chart of VIX (NYSEARCA:VXX) above we can see how the index is an uptrend after bouncing off recent lows in the 14 range and has settled into a new range above its 50 day moving average in the vicinity of 18, still below its long term average of the mid 20s and just below its 200 day moving average (red line).
The chart tells us that VIX (NYSEARCA:TVIX) is in a new uptrend but still needs to break higher to confirm this recent change in trend.
Volatility Index – New Methodology (VIX): Index: +5.4%
iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX): +2.57%, This ETN is designed to track volatility in the markets as measured by the Chicago Board Options Exchange Market Volatility Index (CBOE Index), a popular measure of the implied volatility of S&P 500 index options. The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets. The iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) prices itself off of the average and implied volatility of the first two months of futures contracts of the S&P 500 Index.