Volatility waned and financial, industrial and retail stocks waned. Could this be the sign that investors are becoming too complacent and I do expect to see a correction in weeks to come. To be sure, the volatility is really dropping. Since mid-February, just three of the 37 trading days have featured a change in the Dow Jones Industrial Average of 100 points or more. Compared that to the 13 of 100 points day from mid-January to mid-February.
The last time CBOE Volatility Index (VIX) broke under a multiyear line of bottoms was mid-2003 following the 2000-2002 bear market. The VIX then proceeded to fall for four more years and all the while the S&P rose. Now, the VIX has broken a multiyear bottoms line again, but the VIX now is only at the place where it began the last four-year bull cycle and has much, much farther to fall to equal its lows of the last cycle, even after the spike higher on Friday.
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