The VIX remains elevated in historical terms but there could be more downise to come

• The CBOE Volatility Index (VIX) is 7.57% lower as stock markets start the week off higher.
• In terms of "normal levels" the index is far from its usual range.

VIX daily chart

The VIX is usually there to measure volatility and is calculated using a formula to derive expected volatility by averaging the weighted prices of out-of-the-money puts and calls. These are bearish (Puts) and Bullish (Calls) options based on the S&P 500.

On Monday you can see from the chart below that the index has fallen by over 7%. This usually happens when the stock markets rally and the risk appetite in the market is positive. 

The price is currently trading above the 55 Exponential Moving Average and 200 Simple Moving Average. The moving averages are a good gauge in the VIX as when the price is underneath it usually represents a bull market. In this case, the VIX has used the 200 Simple Moving Average as a support zone and bounced back to the upside. In the future this support could be broken.

The US administration has recently indicated that even if there is a second wave of the COVID-19 pandemic, there will not be another lockdown or period of store closures. This could be bearish for the VIX and during the week if not next week the price may move back below the moving averages. There also seems to be another round of fiscal stimulus on the way, in which US residents could receive another cheque.

If the stock markets continue to trend higher then the VIX could eventually return to more normal levels between 11 and 20. At the moment the price is around 32 and in March was close to hitting 85.50 a far cry from where the market landscape is today.