During the week, I chronicled The Incredible Shrinking VIX, which addressed the issue of volatility falling in a market that was going mostly sideways to down. By the end of the week, the VIX was down 4.80 points or 20.6% from the previous week, to 18.47 – a level not seen since the beginning of November.
The interesting part of the week is that the SPX had a modest gain of 16.51 (1.1%), so that very little of the move in the VIX (perhaps 1.25 of those 4.80 points) can be attributed to a rise in the SPX. The rest? Some of it certainly comes from a seasonal pattern of historically low volatility around the holidays (see the CXO Advisory Group on U.S. Stock Returns Around the Year-End Holidays), but a considerable account is still unaccounted for. It looks like it may take the unfolding of events in 2008 to explain the shrinking VIX anomaly.
On the VWSI front, the shrinking VIX contributed to a new elevated VWSI reading of +6, suggesting that the VIX should be close to bottoming. Ironically, the VIX is up this morning, and so are the markets…
As is my weekly custom, for a survey of the best in current thinking about the markets, Barry Ritholtz at The Big Picture sums up the week that was and the week that will be in his Christmas Linkfest.
Finally, good news for those who are content to sit on the sidelines and wait for a more compelling market signal before committing to a specific direction, PowerShares is launching three new Buy-Write ETFs:
- PowerShares DJIA BuyWrite Portfolio (PGB)
- PowerShares S&P 500 BuyWrite Portfolio (PBP)
- PowerShares NASDAQ-100 BuyWrite Portfolio (PWBW)
Wine pairing: For a VWSI of +6 I favor a semillon. This often overlooked varietal tag teams with sauvignon blanc to form the white wines of
In the New World, semillon has gained a strong foothold in
It is harder to pick a particular US producer that has built a reputation for semillon, but one to keep an eye on is L'Ecole Nº 41, from the
For more information on semillon, StarChefs.com has a good discussion of the varietal, along with a handful of recommended producers in