For the Chicago Board Options Exchange Volatility Index (VIX) it would not need lucky day No. 7 to break its losing streak, instead it snapped on day six.?
On Wednesday, the VIX increased 1.8 percent to 13.86 at 12:48 p.m. EST after hitting 13.22–its lowest intraday level since June 2007, reported Bloomberg. In the previous days, the index had fallen 40 percent, the greatest amount since November 2008.
Jonathan Krinsky, chief technical analyst at Miller Tabak & Co. said to Bloomberg,??People are just looking at these low levels as opportunity to buy portfolio protection. There were also a lot of eyes on it, and often times when that happens as an instrument breaks support levels, it reverses.?
At day’s end, the VIX closed at 13.81, up 1.40%.
Just last week, the index fell a?record 39 percent after Congress reached a last-minute deal to dodge $600 billion-plus in tax increases and spending cuts.
Concerns about the fiscal cliff led many to believe that was the reason volatility tanked but in a Jan. 8 Washington Post article by Greg Sargent, “GOP disarray over debt ceiling” he argues that it came from the?GOP not being as united in their Debt Ceiling strategy. ?
Business Insider.com cited the following?Stifel Nicolaus note by Dave Lutz titled, “Why the huge drop in Volatility??Lutz comments on the Washington Post article by writing:
Seems the huge drop in Volatility can be attributed to 2 things. ?Bad?earnings?expectations already built in – and the “Cliff” threat coming off. ?From WTAW: ?”Boehner has now taken to saying that the GOP?s real leverage in the debt ceiling battle flows not from the debt ceiling, but from the threatened spending cuts in the sequester. But half of those are defense cuts, which Republicans are far more adamantly opposed to than Democrats are – All of which points to what may be the most important fact about the whole debt ceiling fight: GOP leaders want to be granted the presumption of leverage based on the threat of default, yet they are not prepared to deliver on that threat.”?
?What do you think was the reason for the fall?