How the VIX predicted a downturn in the market | Volatility Index coverage

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lisasue
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The VIX (volatility index) represents the market’s expectations for volatility. Many traders refer to it as the “fear index” because it can be used to measure risk in the market. If the VIX is moving up, this can be an indicative of stress, and usually coincides with an upcoming downturn in the market.

For the past few weeks, the VIX has managed to create a floor around 20 and has refused to move below this mark. This is unusual during an up-trending stock market like we have been seeing lately.

A typical floor during a healthy market is around 11-12. The VIX’s refusal to move below this mark is a sign of trouble. When the ATR volatility stop moves below price, it suggests being long, and the VIX has been in that condition for the entire month of August.

As of September 3, the VIX was up 20% in just one day. The S&P-500 was down nearly 4%, and the DJIA was down 3%.
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