One Sniff Will Last You the Rest of Your Journey

The VIX (which is said to measure fear from the options market, or at least an options market taken by surprise of events) chart, below on the daily timeframe, dates back to last summer.

But we also know that since the pandemic any and all spikes above the 20 level have been but a whiff, of which we got a sniff and resumed the bull journey in equities and the VIX came knifing back down into the teens. Heck, even the 2022 mild bear market was characterized by a VIX which was far more prone to falling with equities than rising against them. Here, the issue is whether we see the VIX will find support at the 20 level and then turn back higher, which would finally suggest a meaningful change in character for markets. 

Put another way, we simply have not seen the blindsided events which often spark a super-spike in the VIX. Last summer's pop was the most notable in years (top lefthand arrow on chart, below) but if you blinked in real-time, you missed it, since the Bank of Japan immediately walked back their rate hike and hawkish posture which seemed to ignite the move. 

On that note, we have another BoJ meeting this week just before the FOMC. While no further hike is expected this time around, the key issue will be the tone of the meeting regarding price and wage inflation in Japan. 

As for equities here in America, we have a mixed, slow session amid the holiday, as we expected with Members headed into this week. Just as with Japan, the FOMC on Wednesday will come down to the Fed Chair's tone and tenor regarding future meetings even though no rate change is expected this time around.