Take a look at the two-year chart and you can see how volatile the VIX can be and that it doesn't stay down for very long.
The VIX can stay low for weeks at a time and then suddenly begin to spike. As you may know, the VIX has been called a "fear index."In truth, the VIX is a measure of the market's perceived volatility in either direction, downside and to the upside. It was designed to move with the options premiums on both puts and calls. Let's face it, although this is a holiday-abbreviated week in the U.S. with lower-than-normal trading volume, there are a large number of unresolved threats that market participants skittish now. There's the questions concerning Europe's massive financial woes, China's seemingly flatter economic growth, and then there's the ongoing slowdown in the USA. None dare call it a recession, let alone a Great Recession. But Monday's numbers from The Institute for Supply Management's Manufacturing Index did come in lower than expected in June. This signaled a contraction in the sector for the first time since July 2009. Yes, and when it comes to a slowdown in manufacturing we are not alone. Both China and the European Union manufacturers are no doubt preparing for an increased slowdown and for China, a diminishing demand for their products from exporting nations. Then there's the onset of the next round of quarterly earnings report coming faster than many realize. Reuters reported Monday that Morgan Stanley has said that second-quarter earnings season is likely to disappoint when it debuts with Alcoa (AA) next week. "By now it is clear that the U.S. earnings season will be softer than was forecast a couple of months ago," wrote the firm's U.S. equity strategist, Adam Parker, in a research note. "We would not be surprised to see negative pre-releases this week or notably weak guidance for October beginning the following week", the research note from MS also noted.