VIX 01 (Jun 09 - Oct 11)

[Aspellian]

take a peek.... you may just like what you see...

what does this mean? that uptrend will go higher as VIX has breached a support level and is trending even lower?
Or VIX is at a reversal point??

[millionairemind]

This weekly chart might be able to explain it a little clearer

[winston]

My only conclusion .... "Complacency"

[kennynah]

my conclusion : "no conclusion at this time"

[Aspellian]

VIX support level at $16 seems to be a critical junction. Bulls will hope that this is broken. Bears will say that the end is reached and its time to get out.

its really a case of taking a stand and see the probability of success on either side. = no conclusion!

[winston]

How to Profit on America's New Era of Turbulence By Tom Dyson

There's a huge stock market opportunity setting up right now. This opportunity won't last long, so I urge you to start preparing immediately.

I call it "America's New Era of Turbulence." Big changes are taking place in America, and they're creating waves of volatility in the stock market that could last for years. Let me explain...

It's a big deal when the stock market moves more than 5%, up or down, in one day. Since 1940, it's happened on average only once in every 734 trading sessions. But get this: In the 1930s, it happened 95 times. Between 1940 and 1970, it only happened three times.

By this measure, there was great period of volatility in the stock market for 10 years during the Depression and then no volatility for 30 years.

I analyzed the number of 5% moves in the Dow Jones Industrial Average since September 1929. By this measure, volatility was consistently low for decades. Then in 2008, it exploded again:

This table highlights the periods of turbulence quite nicely, but counting the number of 5% up and down days in the stock market is a crude method of measuring volatility and doesn't show you how durable these trends are once they get started. Here's a much better method...

You've heard of an option. It's a financial instrument that derives its value from the price of another financial instrument, usually a stock, commodity, or bond. Volatility is the most important factor in option prices.

To give you an example, you'd need to pay a much higher premium to buy an option on Apple, whose stock price might move an average 3% per day, than you would to buy an option on a piece of real estate, whose price might only move an average 0.1% a day. Because the price of the real estate is far more stable than the price of Apple's stock, the option on the real estate is less likely to soar in value, so it is cheaper.

Volatility is the most important factor in option prices. Stock market statisticians can use option prices to generate a real-time measurement for volatility. You can even use options prices to infer the market's expectation for future volatility.

In short, option prices generate the most accurate – and useful – measure for volatility. The best measure of volatility is called the Volatility Index ("the VIX"). It's an index of option prices on stocks in the S&P 500.

This may sound confusing, but just think of the VIX as the benchmark measurement of volatility in America's stock market. To look up the VIX, type ^VIX into Yahoo Finance's quote box.

Here's where it gets interesting...

Stock market volatility tends to move in giant trends. You get long periods of almost no volatility, like the 1940s, 1950s, and 1960s. Then you get long periods of high volatility, like the 1930s.

Check out this 20-year chart of the VIX. It's the perfect illustration of what I'm trying to say...

In the 1990s, there was a long period of low volatility (the left-hand green box). Then, from 1997 to 2003, we saw seven years of stock market mayhem as the Nasdaq formed a bubble and then popped (the big red box). Between 2003 and 2007, we had another quiet period where the market ambled along (another green box).

But the market became wild again in 2008... culminating in the highest stock-market volatility in my lifetime. Volatility has fallen over 75% from the levels it reached in those wild days of 2008, but if I'm right about the long-term trends in volatility, then one of the best volatility trading opportunities I've ever seen is setting up right now...

I believe you'll make a quick 50% gain in this trade, and with some luck, you could make as much as 100%... in a few weeks.

In my next DailyWealth column, out on Monday, I'll show you exactly what you have to do to capture this opportunity... and the stock you need to buy to make the most of it.

Source: Daily Wealth

[winston]

Our 50% Volatility Trade, Part II By Tom Dyson

On November 13, 2008, the Dow Jones logged its fourth-biggest daily gain in the stock market since World War II...

It closed up 6.7%. The highlight of the day was the 12.5% rally in the afternoon that erased a 4% morning decline.

The next day, the market fell 5%, recovered all its losses by midday, and then fell 5% again.

If you believe, as I do, that America has entered a new era of government manipulation, instability, and economic turmoil, then going forward, we should expect to see more days like November 13 and much higher levels of stock-market volatility...

In my last DailyWealth column, I ran a chart of the Volatility Index (aka the VIX), showing how volatility moves in clear trends lasting six years or more. Here's that long-term chart of the VIX again. This time, I've drawn support and resistance lines based on the action in the last period of turbulence, from 1997 to 2003.

Using this period as our template for the "new era" of turbulence, we should be able to make a fortune by betting on volatility every time the VIX gets near 17.50 and selling every time the VIX rises to 45.

Now look at this one-year chart. As you can see, the VIX touched 17.50 last month... and then soared... just as expected.

If I'm right about the big trends and our "new era of turbulence," the VIX should quickly return to normal levels near 30... And if we're lucky, we may even get a spike to abnormal levels near 45.

So how do we bet on this?

Well, you can't actually buy volatility. It's not an asset. Most discount brokers offer options on the VIX, but the easiest way to bet on the VIX is through the iPath VIX Short-Term Futures (VXX).

The managers of this fund buy futures contracts on the VIX. Right now, for example, they hold piles of VIX futures contracts that expire in February and March.

Please note, this fund doesn't track the VIX perfectly. That's because of the costs to roll over futures contracts every month and changes in the market's expectations for future volatility. These tracking errors have hurt this fund's performance over the last year. But looking at the prices of future contracts in April and May, this shouldn't be a problem going forward. You may even get the wind at your back.

One more thing: Make sure you use a trailing stop loss and you have an exit strategy for the trade once the VIX rises above 30 again. If I'm right, we could see a comfortable 25% gain from current levels... or a 90% gain if we get another day like I described above.


Source: Daily Wealth

[millionairemind]

So VIX at 50DMA, somehow one of the indices will always swee swee stop there.

Up or down tonight?

[kennynah]

my guess...down..

[winston]

If I've a medium term time-frame, I will bet on it going up.

Easy for me to say because I'm not vested