while some say the VIX portends a correction at some point, it's untrue that this is a new all time low on the VIX
the VIX hit 9.31 in december of 1993, after which the dow rose from the 3700s to nearly 4000, dipped to 3500, and ended 1994 up 2 or 3% for the year...it then gained over 30% in 1995, a year during which the VIX hardly fluctuated at all...in 1996 the dow again had a strong year, and the VIX rose all year, offering little or no correlation
while past performance and various events are no guarantee of what might happen this time, it's interesting (to me at least) to note that like 2007, 1995 was a mid term election year, and like 2007, 1995 saw the release of a major upgrade in computer software (windows 95 last time, windows vista this time)
in any event, while the VIX might be a short term indication of complacency, it's by no means a guarantee that the market is going to drop significantly...note that call premium is just as low as put premium, so while people may believe we aren't going down much from here, they are also reluctant to pay much to bet we are going higher...as such, any "complacency" is pretty equal in either direction, and it could be argued that what is more likely indicated by the VIX is an eventual surprise, be it to the upside or the downside, which will catch the majority of market participants off guard
JMHO of course, your mileage may vary |
