Buzz & Banter
Tony raised the interesting possibility that perhaps volatility could remain low for an extended period of time. Going back to 1993 a "normalized" range for the VIX was between 11-16. There were a few instances where the VIX spiked up above that range between 1993 and 1995. By 1996 the VIX trended higher to establish a new range in the 16-22 area, and then again in 1997 it trended higher toward its spike peak reading of 60 in 1998.
I agree with Tony that it is certainly plausible to consider that the trend is now downward toward lower levels of volatility readings. John has also pointed out a variety of factors that could cause this to happen. My only comment (a reminder really) is that we are seeing this low VIX reading, well below the norm we've grown accustomed to since 1996, in conjunction with a high risk level in the NYSE Bullish Percent Index. Historically, regardless of the range the VIX has been trading in, a reading in the lower end of that range combined with a high risk level in the NYSEBP has been a less than desirable time to establish new long equity positions.
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