Chart Of The Day - VIX Seasonality
Chart Of The Day - VIX Seasonality
A seasonal up-shift in volatility is underway...
It’s Volatility Season: seasonal patterns are well documented in the physical world, with reliable seasonal swings seen in economic data and socio-behavioral trends. So it only makes sense that we also see seasonality in the markets, and around this time of the year volatility has a seasonal tendency to push higher …and as if right on que, here comes the VIX.
The tendency for higher volatility mirrors the trend for weaker stock prices around this time of the year (sometimes referred to as the Halloween effect).
As a technical note, seasonality is simply an average of what happened in the past, and it is important to note that there are exceptions to the seasonal rule (i.e. seasonality doesn’t always work!).
In terms of the current context, as noted last week, the market has kicked into correction mode from overbought, overvalued, and overly-optimistic conditions. We went from everyone being bearish in October 2022, to everyone being bullish in July 2023… but meanwhile monetary & credit conditions are tighter than ever, inflation risks resurging, and multiple leading indicators point to recession. So it’s probably a good idea to pay attention to this seasonal signal.
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