Courtesy of Chris Kimble.
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Did investors get ahead of themselves the past couple of days? From a fear perspective, it looks like they might have!
This chart looks at the Fear Index (VIX) over the past 25-years. As you can see, the VIX has only reached the 48 level, 8 different times in the past quarter century.
Two of the times the VIX hit the 48 level, the S&P 500 had declined 50% and was near the lows of a bear market.
In the last couple of days, the fear index spiked up and hit 50 yesterday as the S&P was nearing an 11% decline.
When looking at 2003 and 2009, the S&P fell 50% and the VIX hit 50 and this time it only fell 11% for fear to hit this lofty extreme. That is a 75% smaller decline to push fear to extremes.
The last time the VIX hit the 48 level was in 2011, when the S&P 500 was declining around 20%. It took almost twice the decline in 2011 to get the VIX to the 48 level. This time it took just a couple of days and a much smaller decline.
Did fear get ahead of itself or did too many investors jump to conclusions too quickly?
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This chart from good friend Ryan Detrick looks at the fear index from a different angle. This chart looks at how much the VIX is above a 10-day moving average. As you can see, only during the crash of 1987, did the VIX get further above its 10-day moving average than yesterday. Did too many jump to conclusions yesterday morning?
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