Why Did the VIX Index Spring Back from Its All-Time Low?



Markets closed last week on a mixed note

Volatility in the global markets remained subdued with minor losses being posted as we head for the close this week. US markets, barring the DOW 30 (DOD), closed with minor losses for the week ending July 28. Companies reported mixed results in a busy week of earnings, which lifted volatility from the lower levels in the latter part of the week. Tech companies (XLK) failed to impress investors with their earnings, which caused the tech heavy NASDAQ (QQQ) to close 0.20% lower for the week. The S&P 500 Index (SPY) closed 0.02% lower after recording another high of 2,484.04 in the previous week. Economic data from the US was mostly mixed. The first estimate of Q2 GDP met market expectations and the Fed left the interest rates unchanged at its July meeting.

Other segments in the financial markets, bonds, and currencies turned volatile and reacted to the FOMC statement’ dovish tone. Bond markets (BND) gained more steam. The Fed is expected to delay rate hikes going forward. The US Dollar (UUP) continued its fall against the majors.

Article continues below advertisement

VIX index hit all-time low of 8.84

The VIX Index (VXX), Wall Street’s widely acknowledged fear gauge, fell to the lowest level ever recorded this week. The VIX Index (UVXY) recorded a lifetime low of 8.84 in the first part of the week. Earnings remained encouraging and indexes moved to higher peaks. Another failure of the healthcare bill and a minor retreat in the tech sector limited an additional fall in volatility. The VIX index rebounded to 10.29 by the end of the week.

According to the latest “Commitment of Traders” report released by the Chicago Commodity Futures Commission, large speculators and traders have increased their overall net short positions to 136,641 contracts from 140,638 contracts in the previous week.

In this series

In the remaining parts of this series, we’ll analyze how different asset classes performed in the previous week. We’ll discuss the outlook for these asset classes.


More From Market Realist