In the past week, we saw a massive spike in volatility and the VIX soared 54% on Tue. Believe it or not, this ranks as the fourth-largest spike in the VIX in the last 20 years...Incredib, right?
| Date | Daily Performance |
|---|---|
2/5/18 | 116% |
2/27/07 | 64% |
1/27/21 | 62% |
11/26/21 | 54% |
Steep declines have been followed by sharp bounces higher with intraday moves from green to red. It's the type of volatility we haven't seen in a couple of months. Since hitting all-time highs in November, S&P has slipped about 5%, a big washdown by nowadays standard. The market is basically making gyrations in reaction to headlines, especially the scary COVID-19 new variant.
As the Wall Street cliche says, don't fight with the market. So we are supposed not to go long when the market is dipping, right? While I totally agree with the saying, the only exception is when the market is at its extreme, for which I think we better bet against it. I think we are at such a panicky extreme right now. I bet in a few weeks time, we will see a lot happier market. For that I'm going long these days by buying in the dip. I especially like to bet for a downtrend VIX and I also see a quick rebound in the oil market. I follow a reliable momentum indicator for oil, called OVX, a volatility index for oil and it suggests oil has likely reached its short term bottom.
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