Since the great February panic, volatility in the U.S. market has been crushed.

In fact, for the last month and a half, the VIX (volatility index) has compressed in a relatively tight range trading range.

VIX

Looking at the Vol Ratio, we see another range.

vol ratio

In case you’re not familiar, the Vol Ratio measures this month’s VIX futures relative to the VIX futures 3 months out.  Essentially, it is a measure of fear in the market.  Spikes to 1 suggest irrational fear in the market place.  The low end of the range suggests confidence or complacency in the market.  

This is one of the tightest and most persistent ranges we’ve seen in recent history.  In all likelihood, that range will break to the upside at some point and lead to a strong move in volatility.

Who knows when that could happen, but it’s something we need to monitor moving forward.