VWSI at Zero, While VIX Rises to 16.95

With its 16.95 close this week, up 1.80 or 11.9%, the VIX is now perched on its highest end of week close since the week of February 27^th.

The VWSI apparently does not believe that the VIX is unusually high, as the zero reading in the VWSI indicates a neutral bias for the next week or two, lending support to my contention earlier this week that “15.00 now looks suspiciously like a floor” in the VIX and “we are entering a new era of increasing volatility.”

Historians may wish to note that not since the middle of May 2004 has there been a VWSI of zero when the VIX stood at 16.95 or higher. During this period, India’s stock market had its worst drop in 129 years over concerns about the role of communists in a new government, oil prices rose over $40 for the first time in 13 years, conflict between Israelis and Palestinians was intensified, and Abu Ghraib was the headline story in the Iraq war.

Is 15 the new 10? In the coming week or two, I will delve into some possible repercussions of an elevated VIX. In the meantime, consider that from the current level, we no longer need such big percentage moves to see a VIX in the low to mid-20s.

(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 an inexpensive Rhone blend, I continue to recommend: Oakley Five Reds; Robert Hall’s Rhone de Robles and Tablas Creek’s Cote de Tablas Blanc; Wrongo Dongo, the contrarian favorite from Spain; and The Stump Jump (I prefer the white over the red) from Australia. If you are looking for additional ideas, I encourage you check out the Rhone Rangers.