Is VIX Pointing Toward Investor Confidence?
Today’s Spotlight Market
Front month VIX futures closed below the 20.00 mark in two of the past three trading sessions, indicating investors may have a bit more confidence in stocks. The underlying factors fueling the stock market sell-off in late August have not shown improvement, but the sense of panic among stock traders seems to have dissipated . Corporate earnings are not expected to be strong for the remainder of the year and the job market may not be as robust as previously thought.
Fundamentals
It seems that some of the negativity in the equity markets in August, when stock prices tumbled, stemmed from a seemingly immanent Fed rate hike. The central bank?s pumping of cheap money into the economy was a key driving force behind the multi-year rally in stock prices. Additionally, there are many investors who believe raising rates would be premature at this point. Corporate earnings for S&P 500 companies are expected to fall by 6.9% the last quarter of the year. The VIX, as a gauge of sentiment, shows investors are expecting the volatility in equities to die down in the near future. November is trading under the October contract, indicating investors are slightly bullish in the near-term. However, the market goes into contango after the November contract. ?
Technical Notes – View Today’s Chart
Turning to the chart, we see the October VIX futures contract nearing support at the 18.98 level. Failure to hold here could be seen as a double top and suggests prices could fall to the middle or even low teens. The RSI is currently giving neutral readings, while momentum remains below the zero line.
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