if the VIX needs to get to where it was in July we obviously have a ways to go yet, though there may be bounces on the way. And, i'm not sure the VIX needs to best it's July spike.
If you have read the interview with Bernie Schaeffer in T & S you would see that he thinks the Vix has to go a lot higher, over 100. I really have no idea but it seems that a reading above 50 has been pretty good indicator over the last couple of years. One thing I think is interesting is how long it has taken the Vix to rise to these levels this time around.
here is Bernies interview. It's pretty good insight worth considering. http://www.traders.com/Reprints/PDF_reprints/SI_SCHAEFFER.pdf
I can agree with that for perhaps a <B>REAL</B> reversal. I was really referring to short term. I guess Tuesday was the big rally day. The points on up days are getting smaller and smaller. And what's this I read on cnbc.com about floor traders hoping for a crash?? We may see the 100 VIX pretty soon, or maybe since their hoping for it, I should view that as a contrarian indicator and go long. There I go out on a limb again ...
The problem with Bernie's belief of a massive spike on the VIX (and a corresponding one-day crash on the indices) is that it has never happened after a prolonged bear market. Rather those kinds of market moves occur at the beginning of a bear market. It is still possible ofcourse. There would just be no historical precedent and it would require a catalyst which we fail to see on the present horizon.
i have an issue with your post. question for you: what makes you think we are at the end of the bear market as your post "after a prolonged bear market" suggests? furthermore if you dont think we are, then you dont know how long it could last therefore you cannot call it a prolonged bear market yet. this could just be the beginning. sorry if i am mincing words but the tone of your post just seemed to imply we were closing in on the end of this bear. i think it could last much longer. however i agree with you on the shortcomings of the vix. my problem with VIX is its a relatively new indicator, not enough data, we dont know historically how high it can go by comparing it with other periods, i.e. how it would have acted for the 29 crash or other bear markets. therefore it is not a credible tool for forecasting long term trend changes. it has be useful for short term reversals but thus far it has only seen a bull market starting in the 80's and hasnt lived through a true, long term bear yet. IMHO i think i remember seeing somewhere a bunch of beancounters and academics constructed essentialy a "best guess" of where the VIX would have been back to the 20's. anyone know anything about this?
Perhaps I should have said it has never happened after a prolonged bear market has begun. Personally, I don't believe we've seen the last of the bear by a long shot. The reasons range from sentiment, cash balances in mutual funds, Abby Cohen still employed, etc. My point was that the bear market has begun and we are in the midst of its paws. High vix or crash days tend to occur at the cusp of the bear. That's how the bull is broken. I vividly remember the action back at the beginning and no matter how much I pointed out that these so called 'great' companies were broken many of my friends simply refused to acknowledge it and continued to believe things would recover as they had always done. Yet that was the signal (among other things).