It almost seems hard to believe that on February 14, 2020, the CBOE Volatility Index (VIX) was trading as low as $13.38. As you all know, the VIX has exploded higher since that bottom, trading as high as $49.48 on February 28, 2020. Yesterday, the VIX pulled back to $31.99 by the closing bell. It is safe to say as long as we are still dealing with the coronavirus scare the VIX should remain elevated.

Traders and investors use the VIX to hedge long portfolios or to try and profit from an increase in market fear. The stock market hates the unknown, and the coronavirus is the ultimate unknown at this time. We in the public have still not received any definite facts about the virus. Remember, the stock market always wants certainty. When there is uncertainty in the market there is usually selling that follows. Right now, the market knows that economic growth is slowing due to coronavirus. Some places such as China and other parts of Asia have been taking an economic hit already. The coronavirus has now spread to Europe, North America and other places around the world. These economies will be disrupted until more facts are know about the virus.

This is a very fluid story and there will be more negative news before things get better. Traders and investors must expect the VIX to remain at elevated levels for a considerable period of time. A break and monthly close above the $50.00 level on the VIX could signal a move sharply higher. After all, in 2009 the VIX traded as high as $96.39. While this level may seem far away at the moment it is not unreasonable to see this happen before this virus is under control.