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One Simple Measure for Investing in a Volatile Market

79 views  2013-06-18 01:10   Tagsblank  reading  holding  around  higher 

Volatility has been edging higher since the end of 2012, but so far, the stock market has held up pretty well.

Take a look at the chart below of the CBOE Volatility Index (VIX), also known as the “Fear Factor Index,” based on the S&P 500 Index. The VIX reading is holding around 16.8—well below some of its high readings since 1990, as shown on the chart. When the VIX is low, it suggests traders are relaxed and not concerned about the current stock market climate; but you need to remain alert, because investor mistakes occur when people are too confident.

The chart shows the inverse relationship between the VIX, shown by the red candlesticks, and the S&P 500, reflected by the green line, since 2002.

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