Saturday, September 15, 2007

VIX continues to indicate the market crisis is over but a lot of people worry it might get worse

The CBOE Implied Market Volatility Index (VIX) continues to strongly suggest that the recent financial "crisis" really is over, but that quite a few people are still worried that the "crisis" will resume at any moment, even if the Fed does cut rates.

The VIX "fear gauge" fell modestly to 24.92 from 26.23, which is still somewhat elevated but certainly not to "crisis" proportions.

The fact that VIX still hasn't pulled back under 20 strongly suggests that people are not confident that even Fed rate cuts will prevent the economy from sliding into recession.

It may take a few more days or a week or two for VIX to retreat safely back under 20. We may have to wait for the Fed to meet on September 18th, and then give the market another week to settle down.

-- Jack Krupansky

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