Saturday, December 22, 2012

A volatility spike

We’ll need to be on our toes from here on out due to the political wrangling in Congress that is clearly roiling the stock market.  There’s a very real possibility that the November-December rally could be unceremoniously cut short in the next few days.  One thing that disturbs me is the chart pattern of the CBOE Volatility Index (VIX), shown below. 

Note the massive intraday reversal in this broad market volatility gauge on Friday, Dec. 21.  Such intraday trading ranges tend to be re-visited in the near term, which means that we could end up seeing a spike in market volatility in the coming days as the “fiscal cliff” debate reaches a climax.  


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