VIX is a function of both premium and fear. When market tanks hard , the OTM put's skew heavily affecting average.
When do you find a top in an "ordinary rally"?? I think in an ordinary rally you dont get extreme overbought conditions with an RSI above 70+. I think this a little extreme. If this were an ordinary rally I think somewhere between 11500 and 12000 we would have seen at least 1% pullback. I would have felt more comfortable with a steady slow climb to 12,000 by Dec/Jan 07 then a rapid jump in just 2 months to 12000....The talking heads are saying DOW 13,000 DOW 14,000 and even DOW 16,000. Some are putting a fair value on the s&p at aound 3500!!!!!
the old adage is... "VIX is high, time to buy VIX is low, time to go" But like many things, it is relative, to prior hi/lo to some extent, and to recent behavior. The later is why so many people have given up on VIX...having nearly flatlined into a relatively low range, they toss it out as if it's no good. However, using rsi as a helper to gauge the relativeness has still snagged the wee pullbacks. amg <a href="http://versaluna.com/2006/vix_amg53.png" target="_blank"><img src="http://versaluna.com/2006/vix_amg53.png" width="60%"></a>
oh man.....i hate to point out the obvious to all the greek speaking geniuses.....vix is low due to structural changes in the way the criminals at nyse choose to rip off their clientele and listed victims.....5 cent rule, penny increments, ridiculous middleman and ecn pricing structure, general, understandable public distrust of jew markets, jew-run companies, and jew "oversight".....there's no one left to bilk....."they" may have to wait another 14 years to trade worthless paper for savings and labor, or move on to an increasingly small number potential victom countries willing to listen to their fable of ducks and hens nonsense.
During the period you show in your chart, the 100 day historical volatility of the S&P500 went from about 11 to nearly 17 - an increase in index volatility of better than 50%. Do you really think there's no relationship between the historical vol of the underlying and the implied vol of the options?
What does Bernie Schaeffer's "vision" have to do with the VIX? But WKRP is one helluva radio station.. Trying to transfer credibility to yourself is lame. Meow. Fairly warm and cozy. VIX hasn't "worked" for 3 years or so. It eventually will again. Attached is a chart for YOUR viewing pleasure. Talk about complacency.