The VIX term structure illustrates, by maturity, market expectations of volatility conveyed by S&P 500 stock index option prices. The chart (figure 1) below shows the option market's expectation of future market volatility as of last Friday. Currently, the VIX term structure is the steepest it has been in several months. This is a sign of complacency among market participants. Contrarians consider this to be bearish for the equity market.

Compare figure 1 with figure 2 below which shows the VIX term structure at the low on 2/3/14.

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Ed Carlson, author of George Lindsay and the Art of Technical Analysis, and his new book, George Lindsay's An Aid to Timing is an independent trader, consultant, and Chartered Market Technician (CMT) based in Seattle. Carlson manages the website Seattle Technical Advisors.com, where he publishes daily and weekly commentary. He spent twenty years as a stockbroker and holds an M.B.A. from Wichita State University.

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