Election Emotions May Start Calming the Markets Shortly

In the interest of bringing some sense of proportion to traders that's based on Reality and not Emotion, I submit the above chart.

The VIX Index charts the volatility of the S&P 500 Stock Index. Normally, this gives most traders an indicator of price movement capability. It goes up and down, like other price charts, but, in this case, the VIX is really giving us a sense of the overall 'mindset' or investor sentiment of market conditions.

However, I prefer to rename this index the Emotion Index or the Panic Index as it gives us a good sense of the emotional state of investors overall. People are driven by news events, pandemic fears, politics, elections, fear and optimism. All of these have their Seasons.

The present 'Season' for the last few weeks has been more emotional than average as the Election looms and lockdown consequences are being dealt with as well as many other invisible factors.

With emotions running higher, folks have pulled back and the Market has faltered and fallen as a result. The peak shown on the chart above is actually behind us right now, and, emotions have been actually calming down some as shown by the declining line after the peak.

While emotions could rise again, the chart is near a normal 'top' area which indicates that it's most likely that the Market will also respond more positively as a result.

High emotional states are hard to maintain and are exhausting to both people and markets. Fast rising Emotional charts like the VIX are quick to rise and quick to fall historically. It's safe to assume that Markets will resume their normal behavior again soon.

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