The VIX coming back, fear of FED?

After weeks of calm, the Vix index showed Friday night a real surge moving up 5 points from 12.5 to 17.5 points, + 40% in one day stock market, triggering a real bell alarm among international operators.

Soaring Vix was the prelude to the Wall Street meltdown. New York was in fact the first to pay the consequences; specifically the Dow Jones closed at -2.13%, S & P500 lost 2.45% while the Nasdaq closed at -2.54%. A first analysis indicates in the words of Rosengren, who on Friday had accused the Fed going to be laggard in raising interest rates.

This indicator, also known as the fear index does not represent a set of equities, but rather an indicator of market expectations on the volatility in the short-term S & P500 index. For its calculation you use the options, or derivatives contracts that give to those who purchase them the right to buy or sell a certain stock security at a specified price at a certain date.

“VIX has been around 12 and bullish sentiment was pretty high for the past two months—a sign of complacent markets. When the VIX is that low, markets usually just tread water, as the S&P 500 did, moving sideways,” said John Kosar, chief market strategist at Asbury Research.