The correction in this past month has been fairly amazing. Stocks had been falling faster than I could juggle and yet, the Straits Times Index actually ended the month basically unchanged. The Dow Jones Industrial Average (DJIA) even closed at a record high, as if no correction had happened. Whenever the stock market goes on a nosedive, I would be reminded to check an indicator, which is the Chicago Board Options Exchange Market Volatility Index, or VIX in short. VIX is used by some investors as a fear indicator, spiking up whenever there is great volatility in the market and staying low when the market is peaceful. As Warren Buffett said, “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”. It is useful to have an indicator to know when others are fearful.

The chart above shows the relationship between VIX and ...