The "Fear" Index closed below 37.50 for the first time since it floated above 37.50 in September of last year. Now, is there really no more fear in the markets, or should we learn a little something from this chart and look at what it's really telling us?
It's either telling us that all the doom and gloom is already baked into the prices which will allow the market to float up regardless of the dreary economic data OR that this has been another bout of irrationally exuberance (greed) jumping on a train that's about to smack into a wall.
The next few weeks will likely give us our answer, but in either case it's good to see that GREED is alive and well again in the markets because where there is greed, fear is just around the corner.
One thing that I constantly remind myself is that the economy and the stock market are often two very independent and illogical beasts that trade lock-step 50% of the time and opposite 50% of the time. The problem as traders is that no one sends out an memo to tell us which days, weeks and months they're going to be.
The most important thing we can gleam from that understanding is that there will be spurts of time where the market trends in either direction and that we are best to make sure we're on the right side of the trades regardless of what the news is saying.
$VIX: S&P 500 Volatility Index Weekly Chart
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