Everyday, Everyday I Have the Blues
By John Stoltzfus,
Chief Investment Strategist
To us last week’s market retracement looked more like (nearly)-end-of-quarter profit taking as well as some homage to the darker seasonality of the month of September as it relates to market downside historically.
About $320 billion was shaved off the U.S. $24 trillion market capitalization as of last Thursday. All but 14 stocks (per Bloomberg data) in the Standard & Poor’s 500 Index had fallen in price.
In the course of last week’s downward episode, the Chicago Board Options Exchange Volatility Index (the
XIV) jumped some 18% from a level of 13.27 on Wednesday to 15.64 on Thursday to rise over 51% from a 2014 low of 10.32 on July 3rd.
There was enough drama around the market movement last week to at least for a short period obfuscate the fact that the VIX was comfortably below its peak level during every major drop since 2012 (per Bloomberg data – please see charts ahead).
By our measurement, the VIX, which is derived from the price of put options (options used to hedge against losses), was off some 30% from its 2014 peak of 21.44 touched in February and down over 81% from its historical peak of 80.86 on November 20, 2008, near the peak of the financial crisis.
In the course of last week’s downward episode, the Chicago Board Options Exchange Volatility Index (the XIV) jumped some 18% from a level of 13.27 on Wednesday to 15.64 on Thursday to rise over 51% from a 2014 low of 10.32 on July 3rd.
There was enough drama around the market movement last week to at least for a short period obfuscate the fact that the VIX was comfortably below its peak level during every major drop since 2012 (per Bloomberg data – please see charts ahead).
By our measurement, the VIX, which is derived from the price of put options (options used to hedge against losses), was off some 30% from its 2014 peak of 21.44 touched in February and down over 81% from its historical peak of 80.86 on November 20, 2008, near the peak of the financial crisis.