The VIX: Could the “Fear Gauge” Call a Market Bottom?

Since the Dow started its precipitous drop from its record high of 14,000 one year ago, options traders and savvy investors have been waiting for the S&P Volatility Index, or VIX, to take notice. The VIX is often referred to as the fear index, but no matter what happened — the popping of the housing bubble, the collapse of Bear Stearns, the implosion of the monoline insurers — it stubbornly refused to trade above 35, a remarkable sign of complacency (the VIX traded as high as 150 in 1987). Even the government takeover of Fannie Mae and Freddie Mac failed to move the needle.

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