The VOLX - an index that reflects the volatility of the US stock market (known as the CBOE Volatility Index) - remains below 22.50 at the start of the new week. Looking at the daily chart, the 22.50 barrier seems to be the key level - in the past it acted as an important support (with one false break), although volatility on US stock exchanges was systematically declining. When we compare the current situation to the years before the pandemic, the VIX still remains at a slightly elevated level, although the trend is clearly downward. Recent weeks have brought very interesting moves - a drop to 16.95 was the lowest levels since the beginning of 2020 - so before the Covid-19 pandemic. It is true that the dynamic pullback in the global markets from last week temporarily pushed the index to 26 points, but it quickly returned below the aforementioned level of 22.50.
On the one hand, investors are seeing accelerating vaccination programs, the opening of economies and a gradual return to normality - factors that should in theory lead to stabilization in global stock markets. On the other hand, recent months have brought many excesses to the financial markets. The unprecedented reaction of central banks and the influx of many new market participants contributed to certain movements that can be safely described as "crazy" - for example "meme" stocks like GameStop, where traders from the Reddit forum led to sharp increases in stock prices. The anchoring effect suggests that many investors are probably hoping that the index will permanently drop below 20 points, although it should still be remembered that the current situation in the markets is historically exceptional to some extent.
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Since the crash in early 2020, the VOLX index has been moving in a downward trend. The chart shows that the level of 22.50 was an important barrier in the past, although the end of March this year brought a long-awaited downward break. The recent minimum (16.95) is the lowest level since February 2020. Source: xStation5
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