If you were watching US stocks yesterday – which plunged and rallied and then fell again – you might be wondering what's going on. It turns out that no one has a clue where markets are going at the moment. There's a way of measuring it called the VVIX, which tracks the volatility of equity volatility. It's sort of like a fear index based on the fear index, known as the VIX. Low VIX is good because it indicates low fear of a volatile market. The higher the VVIX, the more uncertain traders are about where the share-based fear index, the VIX, will be in the future. It's shot up to a record level 0f 169, higher than during the 2008 financial crisis, showing no one is sure if we're living through the next Lehman Brothers collapse or just an August blip and everything is fine. Here's the chart from Bank of America: Here's what the Bank of America analysts had to say about it, emphasis ours: What this means is that, even though VIX has been at its current high level of ~41% many times in the past, there has never been more uncertainty about where it is headed next – the market perceives that it could get a lot worse (or a lot better). The gap between VIX and VVIX is the next gap that has to be resolved, and much depends on the policy response from China. In other words, analysts don't know if the VIX will explode upwards (crisis) or fall back to normal levels.Join the conversation about this story » NOW WATCH: 6 mind-blowing facts about Greece's economy
 |
| READ THE ORIGINAL POST AT uk.businessinsider.com |
