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Wall Street's Fear Gauge Hasn't Jumped Like This Since XIV Died

Published 05/03/2018, 01:23 PM
Updated 05/03/2018, 02:01 PM
© Reuters.  Wall Street's Fear Gauge Hasn't Jumped Like This Since XIV Died
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(Bloomberg) -- The wall of worry is growing taller.

Not only has the S&P 500 Index breached its 200-day moving average, but the Cboe Volatility Index -- the VIX, Wall Street’s fear gauge -- leapt from below 15 intraday on Wednesday to above 18 in trading on Thursday.

As Twitter user OddStats notes, the last time this happened in consecutive sessions was Feb. 2-5, when a record spike in the VIX catalyzed the biggest one-day drop in the benchmark U.S. stock gauge since 2011.

The February move heralded the onset of heightened volatility after a prolonged period of tranquility. That volatility tsunami also forced the closure of the VelocityShares Daily Inverse VIX Short-Term exchange-traded notes, known by the trading symbol XIV, and other exchange-traded products that allowed investors to bet on enduring market calm. This week’s occurrence of the same dynamic suggests a return to that low-volatility world is not at hand.

Historically, though, such jumps from below 15 to above 18 the next day have marked good buying opportunities. The S&P 500 Index has tended to rise over the following week and three months, based on previous occurrences going back to 1990, according to data compiled by Oddstats and Bloomberg.

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