Fear Index VIX Up 50%, And In Backwardation, Confirms Fully Fledged Bear Market

Volatility slapped markets in the face on Monday, surging 50% in its biggest one-day move since February 2007.  Furthermore, the whole VIX futures curve has been inverted and is in backwardation, indicating we’re in a fully fledged bear market, according to market experts.

Dubbed the fear index, the VIX, which measures volatility via options action on S&P 500 equities, behaved just as crazily as it did during other systemically important shock events, like the 2008 financial crisis, the fall of Bear Sterns, the flash crash of 2010, and the 2007 credit market meltdown, according to FT Alphaville.

Indeed, the VIX hit absolute levels not seen since the May 2010 flash crash, when it reached 48 on May 21, 2010, according to Dow Jones.  The VIX term structure has actually flipped and is now in backwardation, after having been in contango only a few weeks ago, when the S&P 500 recovered from a small correction back on July 22, as VIX and Moreshowed.  The VIX has spiked 174% since then while the S&P 500 has declined 20.2%.

What’s VIX telling us?