Volatility Increases And Market Selloffs

There is an interesting article over at the Capital Spectator blog concerning rising market volatility, and what it means for predicting the market bottom. The recent bear market in volatility ended at the end of 2006, beginning of 2007. See the chart below:

Source: The Capital Spectator blog

As mention in the post, falling volatility is a byproduct of rising prices, while rising volatility is often an indication of falling prices. While not perfect, it may be useful as another indicator in our toolbox, and another reason to assume that the bottom has not yet been made.