The new year rally in global markets showed few signs of abating Monday ahead of a speech on monetary policy from Federal Reserve chairman Ben Bernanke. A number of stock indexes around the world have hit multi-year highs as a key measure of volatility, the so-called VIX index, has fallen to a five-year low.
After spiking in May on dismay over Eurozone debt anxiety, the VIX has been trending generally downward, with any jumps being only short-lived. Another spike just occurred. The thing to watch now is if the VIX follows this recent pattern -- or not.
Gains in the VIX Volatility Index are an expression of investor unease. Two weeks ago, its movements suggested stocks had peaked, and the Dow followed with sharp losses. The VIX also holds clues to whether stocks have now entered a long-term downtrend.