Wall Street is breathing a sigh of relief on Tuesday, even if the coast isn’t clear just yet. The Cboe Volatility Index , or “VIX” — which briefly spiked above 65 on Monday — was back below 30 and dipping toward its closing level from last week. .VIX 5D mountain The VIX is well off its highs from Monday as the stock market tries to claw back its losses. The VIX, often called Wall Street’s “fear gauge,” reflects expected volatility over the next 30 days based on the price of S & P 500 options. It does occasionally see short-term spikes, but this reversal looks like it could be unusually large. “Excluding the current shock, there have been 39 VIX spikes to above 35 in our empirical analysis since 1999. Market shock of this magnitude happens on average more than once per year, but is unlikely to sustain. In the subsequent month, VIX tends to drop 74% of the time for a median decline of 5.57,” Bank of America strategist Howard Du said in a note to clients. But the VIX is not a perfect measure of investor sentiment, so its decline doesn’t mean that that the worried about economic growth or the carry trade with the Japanese yen have gone away. “The statistics from yesterday’s selloff had the feel of the ‘sell now ask questions later’ kind of day where everything and anything is piling on to reasons for selling, with 90% of market volume to the downside,” Quincy Krosby, chief global strategist for LPL Financial, said in a note. “Today, the market by any metric is ‘oversold’ and due for a bounce. The lingering question now is whether the concerns that pushed the market into a cascade of selling are alleviated,” Krosby said.
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