Volatility Down Today (VIX, DJI)

The CBOE Market Volatility Index (VIX) was lower today despite equities also moving lower. The VIX fell to under 40 today closing after reaching 47 on Friday. Friday's level represented a 13-month high.

The Dow Jones Industrial Average (DJI) lost 126 points, or 1.24%, to close at 10,066. The VIX lost 1.87 points, or 4.66%, to 38.23. Usually the VIX rises as equities fall; this is due to investors purchasing put options to protect their long positions.

However, given the extraordinary runup in volatility in recent weeks due to European sovereign debt fears, the VIX may be overbought at this juncture and a pullback is long overdue.