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Volatility Trap: Traders Ignoring 'Huge Event' Ahead

The VIX (CBOE Market Volatility Index) is hovering near its 2-year lows. Does this mean smooth sailing ahead — or dangerous complacency?

Paul Britton, founder and chief executive of the Capstone Holdings Group, foresees a "huge event coming up." He offered CNBC his stock market outlook.

Traders are "certainly feeling more comfortable," Britton said.

"But it feels like we're in the eye of the storm at the moment."

"There's a lot more risk capital back in the market. But we are waiting for some key, key decisions from policymakers, etcetera, before the real volatility starts to kick in." (Where's the VIX Now? Minute-by-Minute Charts)

"You've got a huge, huge event coming up with the midterm elections in November. And I don't think that the right decisions are going to be made: they're going to be more political than economic. That's going to effect the market."

And Britton warns of another factor to come:

"To withdraw all the liquidity [furnished by the Federal Reserve and Treasury] — that's going to have an enormous impact on the market and that's going to drive the VIX higher, that's going to drive volatility markets steeper."

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Disclosures:

Disclosure information was not available for Britton or his company.

* General Electric is the parent company of CNBC.

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