From a volatility perspective, 2008 continues to unfold in a curious manner. The markets are decidedly bearish – and even when they briefly recover or drift sideways, the doom and gloom headlines continue to cast a long shadow over investors’ expectations about the markets going forward. The VIX, on the other hand, hardly seems to care, registering an increase of 1.08 over the last seven weeks. The same is true for the VWSI, which has treaded water in the +3 to -3 range during this period.
Last week was more of the same. The VIX dropped 2.99 (10.7%) to 25.02. The VWSI moved more significantly, from 0 to +3, but the +3 reading from the end of the week is still consistent with a neutral outlook.
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 is on tap in his 3-Day-Weekend Linkfest!
In the realm of interesting market sentiment data, I continue to be most interested in the ISEE, which ended the week with several record low readings. This is normally a bullish contrarian indicator, but as I have noted here on several occasions, the divergence with the volatility indices is a bearish signal.
(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.