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The VIX index, a measure of how volatile the S&P 500 is likely to be over the next 30 days, is showing unprecedented activity, feeding into concerns that the financial markets are about to experience huge turmoil.
The Chicago Board Options Exchange Market Volatility Index (VIX) is commonly known as the ‘fear index’ or the ‘fear gauge’ because it is used to predict short-term market expectations.
As Zero Hedge points out, “The last 3 days have seen VIX drop 12.74%, 15.55%, and 13.4% today… VIX has NEVER dropped more than 10% for 3 days in a row ever.”
Last week, VIX spiked to its highest level in almost three years off the back of concerns about collapsing oil prices, the Ebola virus and weak economic growth.
As Money Morning explains, “When the markets grow, the VIX will generally shrink alongside positive investor sentiment and a growth in the major stock indexes. But in times of uncertainty, such as during a financial collapse or geopolitical turmoil, investors load up on option trading to bet on the market’s downside. The VIX will then spike.”
Written by Paul Joseph Watson
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