Last week, I mentioned to our premium subscribers that the VIX was showing unusual behavior. It was unable to sustain a move above the important 23 level on Thursday and Friday, despite the market selling off.
This lack of any kind of fear spike in the VIX was interesting ... from one perspective, it could be viewed as complacency in the face of market weakness. However, as I've written previously, there is more and more "smart money" coming into advanced options trading. This means you dont automatically "fade the crowd" in a contrarian sentiment way, as was the common previous method. Another obvious factor in the VIX not rising is the common Thanksgiving holiday ... with the market closed Thursday and a half-day on Friday, Market Makers are looking to implode premium a bit.
A test of the key 20 level certainly seems to be in the cards (see the following chart) ... whether we stay above 20 on this week's closing basis will likely be an important sign:
VIX Daily Chart
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