VIX needs to go higher in order to bottom in stocks
A financial newsletter for investors said Tuesday that the bleeding into the S&P 500 this year is unlikely to stop until there is a frantic level of selling in the stock market.
The S&P 500 fell on Tuesday, with nine of the 11 sectors in the red. The index has lost 22% from an all-time high of 4,818.62 hit six months ago.
“This market is not going to go down until we see a big drop due to panic,” Kobeissi responded in a Twitter message.
“We are good
But panic selling hasn’t even started yet. The newsletter focused on global capital markets, referring to the Cboe Volatility Index, said that no bear market in history has bottomed without the $VIX at 45+.
The VIX, known as Wall Street’s fear gauge, was just above 28 on Tuesday, and the index would need to rise about 61% to reach 45. So far this year, it has already risen 65%.
“This market will not decline until we witness a significant drop due to panic,” the prospectus said.
Investors are reducing stocks because they expect a
in sight with
Intensifying borrowing costs to cool scorching inflation. Higher energy prices contributed to an acceleration in US consumer price inflation to 8.6% in May, the fastest pace since December 1981. This year the Federal Open Market Committee raised the federal funds rate to a range of 1.5% to 1.75% from an ultra-low range of 0 % to 0.25%.
Investors are waiting to see if the central bank at its July 26-27 meeting will raise the rate range by another 50 basis points or another 75 basis points.
“We are witnessing a large-scale liquidation of everything. Stocks, commodities, treasury yields and cryptocurrencies all go down together,” Kobeisy said in a letter. Separate Tweet on Tuesday.
“This is what happens when you raise interest rates in a recession. Everyone wants cash,” she said.