Level of volatility was at the highest level since 2008 on Monday. This coincide with the fastest 20% decline in the market history. Where the market has never seen this level of volatility and speed of decline since the Great Financial Crisis.
Despite this extreme move, some might speculate that the market will bottom soon evident with the peak caused by the crash on Monday. However, this is a very risky speculation as the VIX measures that rate of change not the level of gains or decline. In other words, the S&P500 can still decline by 5% in the coming week with the VIX barely moving.
On the other hand, if the VIX declines sharply, it can be interpreted by traders and the market that a bottomed is reached.
Despite this extreme move, some might speculate that the market will bottom soon evident with the peak caused by the crash on Monday. However, this is a very risky speculation as the VIX measures that rate of change not the level of gains or decline. In other words, the S&P500 can still decline by 5% in the coming week with the VIX barely moving.
On the other hand, if the VIX declines sharply, it can be interpreted by traders and the market that a bottomed is reached.