The VIX Index hit a new bull market low of 10.73 last week. If it closes the month at this level, it would be the 3rd lowest monthly close in VIX history.VIX is now at seven year low (Jan 07=10.42), and the chart shows the subsequent change in volatility.
The percentage of Bulls in the most recent survey came in at 62.2%, a 9-year high and above 96% of historical readings. There are more Bulls today than at the October 2007 peak. However despite the optimism and concomitant rise in the S&P, trading volumes continue to drop off. Both volatility and volume are drastically lower than they have been in recent years. And as you see, volatility and volume undulate in tandem.
What tends to follow such extreme bullish sentiment readings is a more challenging market environment. Investors should not be surprised to see below average returns going forward as this is what you tend to see (on average) when everyone is already “all-in.”