Generally, the VIX Index tends to have an inverse relationship with the S&P 500 Index. This negative correlation has earned the VIX Index the title "fear gauge" because VIX Index has a tendency to move up quickly when the broad market declines with velocity.
Right now the VIX is getting lower and the market is moving up.
The comparison between the VIX Index and movement in the S&P 500 Index is close, about an 80% correlation, which confirms the reality of the two generally tending to move in opposite directions most of the time. In addition, the correlation generally tends to remain relatively stable throughout different market conditions.
No recommendation
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They say everything is already "baked in" to the market. I hear the talking heads talk about the market like it has it's own brain that is separate from the people's brains who buy and sell inside the market. Sometimes I wonder about this theory as most would have expected the last few rate hikes we have had in this country as they told us over and over they were coming. Yet the market reacted like it was in total shock and tumbled over the announcement that rates would be increasing? Then it is like everybody forgets the status of our economy within a few days and folks start buying everything they can get their hands on again, like now.
If this announcement mirrors the last few, it seems that the market rallies all the way up to the time Powell speaks the words, then during his speech, the market hangs on every word. It is like the market has been in utter amazement that there will be a rate hike every time the Fed hikes it! I am curious to see how the market reacts next week.
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Really I am not that curious. Most of us know there will be another rate hike. So are we smarter than the market or the Fed? Or is the market and the Fed smarter than we are? It is hard to compete with those who can turn markets. Be it a computer or a huge hedge fund. I am not a computer. I can only react. It seems to me there are entities running the market up as quick as they can after a "bad news" announcement has faded. They will catch you if they can. Next Wednesday is getting closer and closer everyday. Be safe. I think in some instances, they depend on retail investors to pick up their crumbs. One day we will surprise them (o: The only way we can do that is to become smarter, and excel at reading their moves.
Talk about holding the bag. Everyone thinks the market will behave as it did between 2008-2019. The post-pandemic economy will certainly look different.
y01004750
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I strongly doubt it goes to 18
lauralea
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@y01004750, I am watching it cos this irrational buying will end. Lots of stuff way overextended! It is hard to short due to the buying frenzy! It is almost like folks are frantically buying stuff like this is the last week on earth or something. They will pull the rug out from under folks soon )o:
@wolffarchitecture, why do people do this? I mean there is an inverted yield curve, astronomical inflation and unemployment is going up. I guess it is not "people" who do this but "people" get stuck during the craziness )o: