S&P 500, VIX point to `going all in' on China trade deal

U.S. equity markets appear to be “going all in” and betting against the possibility of a protracted trade dispute with China, according to Nicholas Colas, co-founder of DataTrek Research LLC. Colas drew the conclusion in a report Wednesday from looking at the S&P 500 Index and the Cboe Volatility Index, which uses options prices to track the 30-day implied volatility for the stock gauge. As the S&P 500 pulled back from a record in the past three weeks, the VIX stayed in line with its average reading since 1990, according to data compiled by Bloomberg. 

VIX may have already fallen enough for stocks to rise

“Significant gains” may lie ahead for U.S. stocks even if the Cboe Volatility Index falls no further from its peak last month, according to Michael Purves, Weeden & Co.’s chief global strategist. He cited the gap between the indicator, known as the VIX and derived from S&P 500 Index options, and the S&P 500’s 20-day volatility in a report Wednesday. The spread ended last week at 13.4 percentage points, the widest since September 2011 when the VIX was lower. Wednesday’s gap was 11 points as the VIX closed at 19.04, far below its recent high of 36.07 on Dec. 24.