Other bear markets have shown similar behavior: realized volatility increases by a relatively small amount, and $VIX therefore does not accelerate to extreme highs. Often, late in the bear market – near its bottom – is when we see a sharper increase in volatility.
The rally that began in mid-March is persisting. Market internals remain positive, and that is finally having enough of an effect on $SPX (and the market psyche) to push prices higher in a relatively slow manner. Even so, there is formidable overhead resistance at 4200 and 4300, so the $SPX chart will not be outright bullish until those levels are exceeded (in my opinion).
Ed Kelly was one of the original floor brokers on the CBOE from Day One. He served on many important committees and was a stalwart at the Exchange. Joe Doherty – whose own recollections are posted elsewhere on this website – had this to say about Ed: “ He was the consummate professional from the moment he stepped on the floor. I very much liked his appreciation of what the early CBOE was, his recognition of what it could become, and his willingness to work with that long term potential in mind. This at a time when many of his contemporaries, in the early days, viewed the trading floor as a candy store from which they should grab as many sweets as fast as they could.”
One of the questions that traders – both retail and professional – have been asking all throughout the bear market that began in January 2022 is “What Is Wrong With $VIX?” Everyone remembers the $VIX explosions during the crisis events over the years, but there is little memory of $VIX seemingly ignoring a bear market decline such as the 25% that has occurred in this bear market. In reality, there have been similar declines with a non-responsive $VIX before, but it is just not something that stands out in one’s memory like the upward spikes do. In this paper, we’ll look at some of those past occurrences and see if we can discern if there is indeed anything wrong with $VIX or not.
Justin Mamis was a famous stock market technician (he died in 2019). I particularly recall that he and James Dines were the only newsletter writers that seemed to be consistently bearish on the 1973-74 bear market, while it was in progress. Mamis wrote three books and created a “cycle” chart of the stock market. Many technicians today still cite his cycle chart – printed below.
Jim Dalton was the first Marketing Director of the CBOE, and he was hired by Joe Sullivan to put together the marketing team for the exchange. As Joe Sullivan wrote in his recounting of the era (be sure to read that recount as well), “Jim Dalton...built the best marketing team assembled at any exchange in that era if not ever.”
Prices edged lower this week, as the bulls are still reeling from the failed upside breakout that took place in February. After the breakout (whether you consider it to be over resistance at 4100 or whether you consider it to be the blue triangle in Figure 1), prices have pulled back below the apex of that triangle and volatility seems to be slowing down at least on a closing basis.
I would highly encourage anyone who is going to read this article of Joe Doherty’s recollections, to first read the article by Joe Sullivan. Joe Doherty was extremely instrumental in the creation of the CBOE, for he worked right along with Joe Sullivan as the process inched forward for four years before the exchange was born. These are some recollections that Joe D has of those years and the ones that immediately followed.
The CBOE’s first President, Joe Sullivan, was “everything” to the creation of the CBOE. In this article, written by Joe himself, the inner workings of politics – both in Washington and in Chicago – exchanges, and traders, all combined to make for a very interesting four years of legwork needed to start the CBOE. Joe did a tremendous amount of soothing, cajoling, and arm-twisting (I’m sure) to get the CBOE off the ground. He served as the inaugural president of the CBOE from its founding in 1973 until 1979.
