Beware the 'JunkVIX' as Société Générale Warns of Market Stress
Understanding Market Signals
The choppiness goes on, frazzling traders’ nerves. Wednesday saw another 1% pullback for the S&P 500 index in the morning, only for the equity benchmark to rally strongly into the close for a 1.1% gain.
Contrasting the CBOE VIX
Yet, the CBOE VIX index, an option-derived measure of expected S&P 500 volatility known as Wall Street’s fear gauge, was relatively sanguine. It’s currently below 18, lower than its long-run average of about 19.5.
The JunkVIX Warning
The problem with the VIX, according to Solomon Tadesse, head of North American Quant Equity Research at Société Générale, is that it’s a contemporaneous rather than a forward-looking signal. A better guide for future broader market stress is SocGen's JunkVIX, he says. Currently, it's flashing a big warning about stocks.
- Focus on future market indicators
- Watch out for signals from JunkVIX
- Monitor S&P 500 volatility closely
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.