The VIX has fallen to the lowest level since mid-September, hitting 31.40 earlier in the session as markets hang on to greater than one percent gains on narrower job losses along with positive figures abroad and strength in Canada. The CBOE Volatility index tracks volatility in options and is often considered a measure of investor fear. The measure is calculated based on option pricing premiums and futures contracts betting on the VIX are available for traders. The index has fallen dramatically from its record high of 89.53 set on October 24 and has been in a downtrend channel since February. The last time the index closed below 30 was on September 12, just days before Lehman Brothers’ bankruptcy filing and government action in American International Group. A lower reading in the VIX is significant as lower volatility will raise risk appetite and help to restore confidence in the economy and markets. Equities have rallied significantly off their early March lows with the S&P now posting a year-to-date gain along with the NASDAQ while the Dow30 remains slightly lower. Also raising awareness of improving conditions, currency markets have taken EUR/USD above its 200-day moving average while the remain remains slightly below 100.00.
