The CBOE Volatility Index, or the VIX, has historically been used to measure extreme oversold levels. Unfortunately, history books are about as useful as slapstick and pulp fiction for traders and investors right now. We just hit a record high on the VIX this morning. The VIX is currently up over 19 points at 86.95. The high this morning so far has been 89.31. So what would a 100 VIX look like?
It used to be that traders started looking closely at stocks when theVIX would reach 30.0 and higher. But in this new bear market we keeptaking out 10 point increments as though they are off-duty policemen ona toll road. At 50m nothing mattered. At 60, nothing mattered. Well,above 80.0 all that can be done is guessing.
So what would a 100 VIX look like. We have asked a few traders whotrack this and of course have been given different levels with nodefinitive answer. On a best guess basis and assuming another straightline down after today, a 100.0 VIX would occur at roughly 7,400.00 onthe DJIA, 800-ish on the S&P, and 1425 or so on the NASDAQ.
Keep in mind that these are "best guesstimates" and would imply astraight down continuance rather than a recovery and a rally behind itfollowed by a more harsh round of selling.
Jon C. Ogg
October 24, 2008