Volatility Index in the Danger Zone

Stock volatility is one “force” tracked by serious investors through the VIX.  Historically, low volatility indicates investor complacency, i.e. lack of concern for downside of equity valuations.  Low volatility has often foreshadowed a market downturn.

A VIX number below 10 indicates low volatility in historical terms, a rare event.  In fact, it is been reported that in the last 28 years there has only been 11 days when the VIX was below 10.  However, two of those days occurred this week, as per the chart below.  Statistically, that is quite improbable and should offer investors concern for equity valuations going forward.

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