MARKET RECOVERY

VIX is a fear gage for the market but it isn't the best one. It's just the one everyone seems to use because it's easily available to retail traders. The one institutions actually use because the correlation is WAY more accurate is credit spreads. The narrower the credit spreads are, the better. The less fear, risk and cause for concern. Guess what. Although VIX spiked 75% today, credit spreads DID NOT BUDGE. You can track them on trading ciew btw but they are lagged by a day.

The last time we saw VIX spike like this but credit spreads not budge was in August. The rest was history. Whilst VIX is signalling fear, credit spreads are saying it was an overreaction. Note when credit spreads are low, this is a sign that dips are very buyable. Always buy in a gradual fashion to build up positions on potential further weakness but this key datapoint that many retail investors neglect is helpful in our decision making

The data tells us that a 50% vix spike always leads to a lower vix when we look a month out. Fast drops always leads to fast recoveries as vix declines, institutions will be pumping alot of funds into equities to balance their books