Last week the VIX fell 2.06 (9%) points to 20.85 after briefly trading below 20 for the first time since November 1st.
Volatility has a tendency to spike up dramatically, but rarely does it decline in the same dramatic fashion. In fact, the successive weekly drops in the VIX 11.7% and 9.0% marks only the third instance since the March 2000 market top that the VIX has fallen at least 9% for two consecutive weeks. For mean reversion aficionados, the last four times the VIX has fallen at 9% or more two weeks in a row, in the subsequent week the VIX has changed +40%, +6%, +19%, and -3%.
While my portfolio is leaning in the bullish direction at the moment, the VWSI is holding steady at +3, a marginally bearish signal for the overall markets.
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:
While I wait for the Fed to make a decision on rates, I am in the process of reading Alan Greenspan’s The Age of Turbulence – an excellent read so far. One of the recurring themes in the book is how the resilience of the economy always seems to exceed his expectations. For more on the Fed, try my Fed Links.
(Note that in the above temperature gauge, the "bullish" and "bearish" labels apply to the VIX, not to the broader markets, which are usually negatively correlated with the VIX.)
Wine pairing: For previous VWSI readings of +3, I highlighted sauvignon blancs from Cloudy Bay and the Marlborough region of New Zealand, as well as some excellent California producers whose sauvignon blanc can be had locally for $10 or less: Bogle; Chateau St. Jean (where it goes under the fumé blanc moniker); Concannon; Kenwood; and Sterling. More recently, I was impressed by a complex sauvignon blanc, with a little bit of oak, from Gary Farrell Vineyards. Their 2005 effort can be had for about $25; for my money, it knocks the socks off almost all of the chardonnays in that price range.
Finally, for an entertaining (think the mannerisms of Joe Pesci and Woody Allen blended with the enthusiasm of Jim Cramer) and informative look at sauvignon blanc, I encourage the reader to sample Gary Vaynerchuk's "Sauvignon Blanc Taste-Off" on wine library tv.