The VIX is almost back to serene levels (chart). For beginners, VIX is the volatility index for CBOE options. Volatility means how fast stocks are moving, though generally a high VIX occurs during steep market declines, while quiet markets or steep rallies usually produce a decline in VIX.
Some folks call VIX a fear indicator. Conventional wisdom is that a low VIX is a sign of complacency and dangerous for bulls. Low volatility translates into lower option premiums. Used in isolation by itself, VIX is a poor timing tool. A low VIX may persist for some time before a decline begins. A high VIX may go much higher before a bottom is in place. I see it as a confirming indicator, and a quick sentiment gauge. Right now, VIX is telling me to continue to be cautious.
Some pundits are predicting a fall low for the stock market. Seasonally, August has been one of the worst months for the stock market. Like the VIX, seasonal factors are not enough to trade on by themselves, but one more thing to consider.
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