We may be stuck in a holiday time warp, but I find the lack of fear in the VIX to be more than a little surprising, particularly given the spate of gloomy headlines. I talked about this same subject three weeks ago, but the gulf between the VIX action and the news flow has grown wider and wider ever since. Is it possible that this kid has already grown up enough to get a hedge fund job?
The ISEE (below the long-term mean for the 30th day in a row) and the CBOE equity put to call ratio (spiking once again) both indicate that call buying relative to put buying is considerably below historical norms, which makes the VIX numbers even more surprising.
In times like this I turn to the VIX:SDS ratio. As shown below, my proxy for the fear premium component of the VIX is now showing a reading that is substantially below the 10 and 100 day simple moving averages. Is this merely a case of desensitization or is something else going on?