The days of tranquil, docile markets may be nearing an end. Measures of risk are rearing their heads once again, with the CBOE Volatility Index VIX, +3.94% closing at its highest level of the year in Thursday trade and jumping above its 200-day moving average, now at 13.54, Friday for the first time since December of last year (see chart below):
The gauge finished at 12.96 on Friday, but was pressing higher Monday, with an early peak of 15.11, representing a roughly 17% jump.
Broadly speaking, moving averages are used by technical strategists to help to judge if short-term and long-term directional momentum in a security is intact. Right now, the VIX, also known as Wall Street’s fear gauge is creeping toward the long-term average, which suggests that it could attempt a firmer breakout, in the parlance of chart watchers.
To be sure, the VIX remains well below its historical average of 20, but the gauge is a sign of how much investors are demanding to pay for protection 30 days in the future for price swings in the S&P 500 index SPX, -0.34% Lower levels of so-called implied volatility signal complacency to some, while higher readings can be a sign of elevated anxiety that the market is headed for turbulent times.
Last week, the VIX climbed around 15%, which marked its sharpest weekly rise since the 22.7% jump during the week ended Dec. 30, according to FactSet data.
There is a reason to believe that choppier times are ahead, particularly after the S&P 500 and the Dow Jones Industrial Average DJIA, -0.39% snapped a 109-streak of days without a 1% drop—an uncanny record for equities. On Monday, the Dow was on track to mark its longest streak of down days, eight in a row, since Aug. 2, 2011, according to Dow Jones data.
Over the past four months, Wall Street has been sanguine about President Donald Trump’s election victory, betting heavily that pro-growth pledges made during his campaign, including tax cuts, infrastructure spending and deregulation, will juice the economy and the broader market.