VIX 01 (Jun 09 - Oct 11)

[kennynah]

good one MM....thanks for pointing this out...

[millionairemind]

Interesting to note that for such a big up day, VIX is up 0.53% instead of plummeting and still above the 200DMA.

[kennynah]

I guess people are buying protection

[winston]

Wekly Review

VIX. Once again the VIX held the 200 day EMA on the low and bounced as the market sold off toward the end of the week. Actually it did not sell off until Friday.

There was a creep higher as the market moved laterally on Wednesday and Thursday. Then on the Friday selloff, it did rise up 4.4%. That was well off its high and hardly a great move by volatility.

Volatility is once again not associating 1:1 with the index action. That is because there was a fairly sharp selloff on the SP500 that took away over one third of the gains off the lows, but the VIX did not show an equivalent move.

It is very sluggish, and is not ballooning higher despite all of the gloom on the financial stations, in the AAII investor surveys, and in the sentiment survey for the investment advisors.

They are all extremely negative, and the VIX is not showing that same level of fear. That helped bring the market back up. Even though it hit a new low, VIX did not hit a new high, and that was one of the factors predicating the bounce.

After a pullback on Friday that may have been very expiration related in itself given that the VIX is hardly moving higher we may see a bounce back and see VIX fall right back down to the 200 day EMA.

VIX: 26.25; +1.11
VXN: 26.87; +0.3
VXO: 26.49; +1.65


Source: MarketFN.com

[winston]

Weekly Review

VIX. There were a series of lower highs from the VIX after it spiked in May during the flash crash and subsequent test lower. In June and early July, I noted that when the market made the new low in the new 2010 lows, VIX did not make new highs.

I suggested at the time and I felt strongly about it that that indicated the market would have an oversold bounce and we would have to see how it performed from there. Now volatility is back down to the 200 day EMA.

It held there and then bounced when the market sold off on the first test of its oversold bounce, but it rebounded. After a rebound it sold back to the 200 day EMA after this last run. Now it has not broken down even though the market has broken to a higher high.

Looking at the SP500, the high in this selloff is where volatility bounced back up. Now the market is breaking back through that high, but the volatility is still holding at the 200 day EMA. Looking back to mid June, that is when volatility hit the 200 day EMA. There was a higher high in June, and there is a lower high now.

Is that suggesting this move is over? After all, there was a higher high at this same level, and here we have a lower high. Actually, I think this suggests that volatility is going to break lower and the market is going to run higher.

VIX: 23.47; -1.16
VXN: 24.16; -1.06
VXO: 23.33; -0.94

Source: MarketFN.com

[winston]

You Should Be Buying Put Options By Jeff Clark
July 29, 2010

Get ready for more volatility.

On Wednesday, the volatility index (VIX) closed at 23, its lowest level since late April – right before the "flash crash" in early May. During the flash crash, the VIX spiked from 23 to above 40 in just a few hours.

The Volatility Index is commonly used as a measure of investor complacency or fear. A low VIX implies investors are relaxed and not concerned with potential turmoil in the markets. When the VIX is high, investors are panicking and running for cover.

The VIX also helps determine the premium option buyers pay to buy puts and calls. In periods of high volatility, and high levels of fear, investors are willing to pay more to reduce their risk by using options. Selling options when the VIX is high is a smart strategy and a great way to take advantage of fear in the marketplace.

But when the VIX is low, you need to be a buyer of options. And right now, options are as cheap as they've been in three months.

The iPath S&P 500 VIX Short-Term futures ETN (VXX) looks like it's ready to start a short-term up move. Take a look at this 30-minute chart...

This is a classic falling-wedge pattern. These charts usually break out to the upside.

Since VXX is designed to track the action in the volatility index, a breakout to the upside of this chart means volatility is moving higher. Of course, that means investor fear is about to increase – which is consistent with my belief that the stock market is ready to fall hard at least over the next few days. It also means the premium investors are willing to pay for options is about to increase.

If you ever wanted to buy cheap put options and bet on the market moving lower, now is a great time to do so. And if you're interested in income-producing strategies like selling covered calls or selling uncovered puts, you'll have a terrific opportunity to make money once this pattern plays out and the VIX blasts higher.

http://www.growthstockwire.com/archive/ ... jul_29.asp

[winston]

Weekly Review

As I anticipated, volatility did break below the 200 day EMA as the market rallied and made a higher high on this move off the false breakdown. With the selling to end the week, volatility jumped right back up.

Friday was a bit of an aberration. Fear did spike because of the GDP coming in at 2.4% versus the 2.5% expected. It calmed down, turned around, and basically tanked into the close.

What I anticipate next week is seeing this 1-2-3 (maybe 4) pullback on the SP500 and NASDAQ, a bounce, and that should send volatility more decisively below the 200 day EMA.

Is that a terrible thing? Does that mean the market is overbought and is going to sell off? Not at all. Volatility can be very low for very long periods of time. As a matter of fact, it was at record lows for several years as the market rallied in the 1990's.

Do not get too caught up in whether volatility is high or low. Look at where it is relative to where it has been and what the stock market has been doing relative to the volatility.

VIX: 23.5; -0.63
VXN: 24.52; -0.66
VXO: 23.03; +0.18


Source: MarketFN.com

[kennynah]

use VIX as ONE indicator...like all technical indicators, it is merely a peek at market sentiments...

there's never any absolute certainty that any technical indicators will point to a future event... they all simply have the tendency to be repetitive, suggesting repetitive human behaviour and actions...

bro C, in one of his posts, highlighted the aspect of human psychology in investing... and i tend to agree with his take on the importance of being synchronous with it... and by the way...i agree with MM's view that the human psychology is all encapsulated within the charts... only a question of whether one is trained enough to decipher it...

nothing moves the markets more than human psychology... this is very powerful...

"up, up and awayyyyyyyyyyyy....."

[winston]

Weekly Review

VIX. The VIX fell 0.3% on the session. It broke below the 200 day EMA over a week ago. It tried to rebound on that sharp selling one day, but now it is back down. People are worried. They say there is nothing but trouble ahead because it is breaking below these twin lows and is also breaking below these twin peaks.

The VIX does not work that way, however. It can go down and make the lower lows while the market can continue higher for quite some time. It has done it for years on end at other times. If it falls back to the April levels, we may have an issue, but there is still quite a ways to go. Notice that it can slow down as it falls.

It can continue with very small, tight days and tight ranges and not cover much ground. That means the market can go up for quite some time. I am not saying that is what will happen, but the VIX is not indicating anything adverse will happen to the rally.

VIX: 21.74; -0.36
VXN: 22.84; -0.43
VXO: 20.62; -0.73

Source: MarketFN.com

[winston]

VIX: 25.49; -0.95
VXN: 25.76; -1.14
VXO: 25.45; -0.65

VIX. The VIX has been moving in a range, more or less holding at the 200 day EMA that is coincident with the January and February peaks. There is enough gloom in the market to keep it at a slightly elevated level.

It rallied even as the market put in a bit of a gain. There are worries about just how valid any market move is. When you listen to the financial stations, you can feel the gloom out there; it is very depressing.

Everyone seems convinced that the market is in trouble and we are headed for a double dip. Yet the market is holding in its range. Volatility is holding at a semi-elevated level, but there are no cracks in either.


Source: MarketFN.com