VIX UNDER 20?!?by Danny on August 12th, 2008 at 2:29:31 am |
Here’s a look at the S&P versus the famous VIX.
The S&P is color coded
BLUE : The VIX is below the 21-day MA 2:2 bars
RED : The VIX is above the 21-day MA 2:2 bars
GOLD : The VIX is below twenty
(some bars are gray because they are the transition days, ie, VIX above 21 day 1:2 days)
Conclusions:
- I haven’t tested a whole host of MAs and arrangements, but my main takeaway is that is it better to wait for the VIX to decisively break its short-term trendline (indicated in red) than to get short than solely on the basis of a below 20 VIX.
- While it worked great in January, other times you had to wait, compared to the immediate gratification of shorting on the red signal.
- It’s also funny that in hindsight you can see where the bear really began, and that was when volatility picked up in mid-July 2007.
- I conclude that yellow is a sell / cautious, and red is a short.
Hey, I like this!
That’s a neat charting software. What do you use?
August 12th, 2008 at 5:37:05 amblocks. I recommend it highly.
August 12th, 2008 at 2:38:01 pmGio, blocks is free. http://www.blocks.com
I’ve been trying it out.
If you want added capability like backtesting, then that costs.
Its charting stuff is not bad for free.
August 12th, 2008 at 3:14:13 pmthanks. will czek it out
August 12th, 2008 at 4:16:42 pmThanks for this. Good stuff.
August 12th, 2008 at 5:55:36 pmYou want to get a real warm and fuzzy, check out the fifteen year VIX weekly chart.
We were in an “aberration” over the last cycle (til July of 2007) of bizarre “below 20 VIX.” We are now headed demonstrably back into volatility-ville. These recent highs were nuttin’ compared to the big numbs of the dot com meltdown and subsequent bear.
More expensive options means sell calls and use the dough to buy puts….
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August 12th, 2008 at 7:47:39 pm[...] there’s the complacency in the VIX. As I mentioned the other time, it’s best to wait for red to get short, but in any event, gold has been a low-risk time to [...]
August 29th, 2008 at 1:10:28 amGreat work, Danny!
Color coding the SPY chart really shows the significance.
One word of caution: you should further back test your chart to look at a solid bull market (80s, not the bubble cr*p) if you have VIX data going back that far
September 2nd, 2008 at 3:42:31 pmWhat’s interesting is that the VIX was NEVER above twenty, save for a few anomalies UNTIL July of 2007, which in hindsight, of course, is when the bear really started.
So 2003-2007 was all gold, the whole way.
I can only test as far as I have VIX daily data, and sadly that is only 5000 bars, taking me back to the beginning of the decade.
The relationship held true during the bear mkt of 2000-2003 however.
September 2nd, 2008 at 3:51:21 pmbtw, you are allowed to swear here and be as vulgar as you feel comfortable being, so you don’t need to star out crap if you feel like venting and saying “shit.” just FYI.
September 2nd, 2008 at 3:52:27 pmBlocks is excellent. It’s CPU-intensive, but worth the upgrade/wait.
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In other news, I stumbled over to DT’s blog for a second…and…what a mistake that turned out to be! What the FUCK is going on over there??
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I just realized that this post is like 600 years old. Damn.
September 2nd, 2008 at 4:10:09 pmIt was so gay you had to claw out your eyes and now you’re blind and can’t trade?
You turned into a pillar of salt, for looking over your shoulder at DT’s blog?
September 2nd, 2008 at 4:12:52 pmThat about sums it up. Yes.
September 2nd, 2008 at 4:17:45 pmDT’s sister is posting in his absence. She redecorated.
September 2nd, 2008 at 4:24:19 pmDpeezy - it is old, but still valid. If people noted this for themselves they’d have a good indicator.
The reason this thread was bumped is bc I linked to it on another bloggers page. It was relevant to the discussion, and may have given me a few new readers.
DTs blog was just as gay before sis got involved, FYI
September 2nd, 2008 at 5:31:25 pmValid it is. I think you should start a blocks scan/layout/chart sharing service. Or perhaps that’s what PPT is going to be?
September 2nd, 2008 at 6:06:02 pmit’s not, but I’m down with that.
But then, what would I be good for?
September 3rd, 2008 at 4:08:59 amThe fact that it’s not has piqued my interest in PPT even further. An actual standalone application/service…very nice. High five!
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Fine, be all Woodshedder-like and keep your secrets to yourself.
September 3rd, 2008 at 1:35:13 pmFuck that Woodshed teasery. Honestly, I would either give or sell them to you. I may just give them to you dpeez. Everyone else must pay. Sorry, world aint fair.
just kidding.
but, dpeezy, email me.
September 3rd, 2008 at 3:38:59 pmman, someone really negative karmaed me just now.
September 3rd, 2008 at 3:59:53 pmDon’t give the man negative karma just because he’s willing to help out his friendly neighborhood hoodstar.
Really, I’m just looking for ideas to expand my RSI(2)/Stoch’s scans & filters. It’s all very basic right now as I have not delved into the programming side much.
Anyhoo…if you’re feeling generous, I take handouts without guilt or remorse (click the name to email)…although you can keep the CutCo knives. Had a couple buddies in college who had to peddle that stuff to get some extra money - I just went to work for the post office. Much easier, plus the night-shift crowd was quite the collection.
September 3rd, 2008 at 4:34:20 pm