Volatility Insanity Return :Averages Spike

After the shock of early August 2024, the Volatility Index (VIX) had ups and downs, but the averages did not move much as the spot prices recovered quickly from such spikes. But on 3rd April, this changed. The spike in spot thereafter started to influence the averages of short, medium, and long periods. It has now been eleven trading days since the VIX was above that day's high and close. 

Why is the movement of averages more important? Every crisis/correction/bear market is reviewed. The trigger can be various, but a common factor is VIX averages moving and remaining above normal. In recent times, when the S&P 500 fell by 19% during 2022, the VIX averages remained above the 55-week and 55-month average throughout the period. 

This changed in December 2022 when averages moved below and continued to remain below till July 2024. From then onwards they remained between 55 Week and Month. On 3rd April, they moved out of that range given the large falls in markets across assets. 

The question is where does it go from here? Though spot prices have substantially reduced the averages are elevated. This would create a higher probability of spikes in future. This will only change if averages move below 55 Week and Month. Given such a high uncertainty environment it is unlikely to do so keeping most of the positions hedged and risk lower.