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What Is The VIX Telling Us
jacsar
post Posted: Mar 20 2013, 01:17 AM
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In Reply To: jacsar's post @ Mar 20 2013, 12:50 AM

Two more links covering the volatility... http://kingworldnews.com/kingworldnews/KWN...g_Reported.html

This was the ist one... http://kingworldnews.com/kingworldnews/KWN...y_%26_Gold.html

 
jacsar
post Posted: Mar 20 2013, 12:50 AM
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In Reply To: flower's post @ Mar 19 2013, 06:26 PM

Hi Flower, this could be put on any number of links but what the good Dr has to say is relevant overall to the big picture, currencies, gold and to what is happening in Euroland and Cyprus...to my mind its well worth a listen if you can get past Kings annoying intro... http://www.kingworldnews.com/kingworldnews...ig_Roberts.html .... cheers...was a good follow on after watching 4 Corners Monday night on the Banks Too Big To Bail and Bankters Too Big To Jail.


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flower
post Posted: Mar 19 2013, 06:26 PM
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Market volatility Increasing:
Attached File(s)
Attached File  volatility_increasing.gif ( 23.9K ) Number of downloads: 5

 




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Combining Fundamental comments with Fundamental charts.
 
arty
post Posted: Mar 15 2013, 11:59 PM
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I reckon we can take as established fact that the VIX is lagging the markets, simply because it's derived from volatility of the US indices.
It has also been established that VIX and US indices move generally in opposite directions, which is probably due to the old observation "Up by stairs, down by elevator." Meaning when markets are slowly rising, their volatility is low; when they're falling, it happens generally in larger steps, aka higher volatility.

Attached File  SP500_vs_VIX.gif ( 62.79K ) Number of downloads: 4

If that is the way the VIX "works", then it stands to reason that only a long-range red candle (sharp drop) of the S&P500 and/or Dow would lift the VIX off its current decreasing values. VIX' little spikes last May and December have apparently not gone with a cataclysmic collapse of the US Market, so we'd need to see the VIX rise quickly well above 25 before we could talk about a serious threat to US markets. Of course, that's all just IMHO, even idle speculation; I reckon it makes more sense to monitor the market itself, not a hazy mirror image of a derivative.

In terms of fear and euphoria, however, I take comfort from the current low numbers of the VIX; it seems to show that, no matter how grim things look in parts of the USA, the market participants seem to be fairly confident that their economy will continue to pick up. And if I read the announcements correctly, where the first quarter is expected to be on track to a 2% GDP rise, an average increase of companies' profit margin by 10% ought to be achievable. That's what the experts reckon has been factored in to current price levels.



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I trade daily, but I am not a licensed adviser. Whether you find my ideas reasonable or not: The only person responsible for your actions is YOU.
I follow two rules: (1) There are no sacred truths. All assumptions must be critically examined. Arguments from authority are worthless. (2) Whatever is inconsistent with observed facts must be discarded or revised. We must understand the Market as it is and not confuse how it is with how we wish it to be. (inspired by Carl Sagan)
 
flower
post Posted: Mar 15 2013, 10:23 PM
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QUOTE
Couldn't you also say the VIX is close to where it was in 2005 ? actually looks closer to 2005 than 2007 dont you think ?


Hi mistagear, thought it best to transfer to a dedicated thread, just have some sort of feeling we might be revisiting the VIX as an indicator in the very near future, so enclose a monthly chart of the VIX from 2005.

Got a feeling that history has a habit of repeating?

Attached File(s)
Attached File  VIX_Monthluy.gif ( 16.2K ) Number of downloads: 8
Attached File  SP500_since_2007.gif ( 15.84K ) Number of downloads: 5

 




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Combining Fundamental comments with Fundamental charts.
 
flower
post Posted: Jul 28 2011, 11:02 AM
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Just have a look at the US Volatility index over the last week as the US descended into chaotic indecision.
Attached File(s)
Attached File  Volatility.gif ( 7.68K ) Number of downloads: 14

 




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Combining Fundamental comments with Fundamental charts.
 


arty
post Posted: Mar 20 2010, 01:01 PM
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In Reply To: hungry's post @ Mar 20 2010, 10:41 AM

Strangely enough, while the VIX appears indeed to be increasingly lagging, it's still subject to statistical analysis; IMHO, that means I can still extrapolate its likely direction in the near term, e.g. by studying trends, momentum, and divergences.
Just check out the 3 examples in the chart below:

Attached File  VIX_19_03_10.gif ( 31.76K ) Number of downloads: 6

Between 22/2 and 8/3, a Bullish Divergence appears; as the VIX charts the intensity of the overall market's fear, this Bullish omen is of course the opposite of a positive change.

By that reckoning, fear and volatility should be coming off a Low and move higher from Monday onward.

As far as historic ranges, especially Lows and Highs are concerned, I half agree with you, Hungry: There is probably no upper limit for the amount of fear and uncertainty in the market. In recent times - "recent" as in "since the VIX has been calculated - there has been arguablt only one slump as drastic and scary as the GFC. Therefore, it's hardly a surprise that the earlier maxima (e.g. the one after 9/11) were eclipsed in October 2008 by a peak almost twice as high.

Attached File  VIX_m20yr.gif ( 26.67K ) Number of downloads: 7

While that level, touching 90, may look extreme, there is really no upper limit to how scared the Market can make people.
(Remember: We're talking excitable US lmaosmiley.gif , not laid-back "she'll be right mate" Australia cool.gif )

As regards the downside, however, I can't see the lt Low of about 9 broken again. That would require an incredible amount of calm complacency that Americans as a whole seem incapable of. The only time when 9 has been broken - albeit only slightly and briefly - was in 1993 after Kuwait had been "liberated" and Iraq beaten back for good.
(How wrong they were! sadsmiley02.gif How could they leave unfinished business that would come back and haunt them with a vengeance.)



--------------------
I trade daily, but I am not a licensed adviser. Whether you find my ideas reasonable or not: The only person responsible for your actions is YOU.
I follow two rules: (1) There are no sacred truths. All assumptions must be critically examined. Arguments from authority are worthless. (2) Whatever is inconsistent with observed facts must be discarded or revised. We must understand the Market as it is and not confuse how it is with how we wish it to be. (inspired by Carl Sagan)

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hungry
post Posted: Mar 20 2010, 10:41 AM
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In Reply To: mistagear's post @ Mar 19 2010, 10:03 PM

Hi Mista
My observations ( I look at the vix dly) are the same as yours. It's a lagging indicator.
It does however give a hint when it gets to extremes that volatility will return shortly. Like everything else, the rubber band can only get stretched so far, before a reactionary move. Last nights small drop on the Dow has had it's predictable response with a small VIX rise.
The last few days Dow/S&P have been testing prev highs/resis coinciding with derivative expiry, so we could predictably expect things to get volatile anyway.
While the vix is very low atm, it has certainly been lower. The ave low pre GFC was about 10. Who knows how low it will go this time. Nobody predicted it would ever get as high as 90 in 2008, because it had never been anywhere near that high in history. I think around 25 was the record prev record high pre GFC.
Who says it can't go as low as 5 or even lower in extraordinary times?

 
mistagear
post Posted: Mar 19 2010, 10:03 PM
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In Reply To: farmer fred's post @ Mar 19 2010, 07:48 PM

FF,
my past experience with the VIX has been.......... if you look at both the US equity markets and the VIX intra-day as significant events unfold which change the VIX, the DJI and SPX move slightly AHEAD of the VIX.

In the past there may have been been some credence in suggesting that options traders were more sophisticated investors than equity traders and therefore more likely to lead equity markets coming into a period of turbulent weather for markets... however over the past few years I have on many occasions been watching both markets during mini meltdowns, and I see that equities actually lead the VIX.

My personal opinion is that the VIX is an inverse LAGGING indicator and no more use in predicting the future than a crystal ball..and at least with a crystal ball you can drill holes in it and bowl pins down with it.
I know many swear by it's magical powers and everyone is welcome to their own theories as I am comfortable wit mine.

Cheers, M



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farmer fred
post Posted: Mar 19 2010, 07:48 PM
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In Reply To: flower's post @ Mar 19 2010, 06:25 PM

Question before the house: Can we use the VIX as a predictive measure for the market?

The Chicago Board Options Exchange Volatility Index, known as the VIX, or the “fear gauge,” has been heading south.

The VIX closed at 16.91 on Wednesday, down 4.4%, hitting its lowest point in nearly two years. The Wall Street Journal notes that there hasn’t been a close below 17 since the 16.47 close on May 16, 2008.

This might lead some to figure that investors are feeling a lot less jittery about the equity market.

Then again, if recent research on the subject is to be believed, maybe the much-hyped gauge actually tells us precious little.

This is what the research team at Birinyi Associates recently concluded, after studying the issue in-depth.

The analysts there note: “For those whose time and patience is limited, we will at the outset present our conclusion: the VIX is a coincidental indicator with limited predictive value. It details, perhaps better than other measures, the volatility of the market today but not tomorrow or the day after.”

Birinyi generously passed their research to us for a quick review. CliffsNotes version: They find that low readings, generally considered bullish, are followed by mixed markets for the next 60 days.

Interestingly, they note, when readings are high -- which is generally considered a negative -- the market actually does better in the one-, two-, and three-month readings, but is lower six months out.

Okay, but what about violent spikes in the VIX?

Birinyi says that extreme readings -- both up and down -- are followed by a market which is higher 90 days later.

Bottom line: The VIX, so the analysts say, is a measure of current volatility with little or no predictive or indicative value regarding the course of the market.

For the record, it should also be noted that Birinyi continues to have very little patience for all you technical analysts and chartists in general.

They rattle off their gripes: a disappointing record of articulating market turns; an even more disappointing record of stock selection; and their tendency to comment rather than analyze.

Of course, the VIX still has its defenders.

David Penn of Trading Markets notes that traders use the VIX both to trade markets like the SPDR S&P 500 ETF (SPY), which includes holdings like Apple (AAPL), Exxon (XOM), and Microsoft (MSFT), as well as to trade the Volatility Index itself through instruments like the iPath S&P 500 VIX Short Term Futures ETN (VXX).

Penn writes:


Larry Connors [Connors Research] showed that when traders compare the VIX to itself over the short term -- for example, comparing the VIX to a 10-day moving average of the VIX -- this widely used indicator actually has a very good track record of helping short-term traders anticipate and trade market turns. The trick is to see the VIX as a very dynamic indicator, not a static one.


Gluskin Sheff’s David Rosenberg, bear of all bears, also weighs in. He asks his readers to consider the following:


The VIX index slides from 42 on October 9, 2002 to sub-18 exactly five years later and the S&P 500 doubled; the VIX then surged to 50 by March of 2009 and the market was down 60%; the VIX then went on to plunge from 50 on March 9, 2009 to sub-18 on January 19 of this year and the stock market soared 70%. Since January 19, the VIX has been flat and so has the equity market.


To which Adam Warner, a proprietary option trader with Addormar, responds: So what?

Birinyi's whole point, he emphasizes, is that the VIX works as a coincidental indicator and Rosenberg doesn’t disprove that thesis.

“So what if the market was down and the VIX was up?” says Warner. “The VIX moved because the market moved.”

From his perch, Warner thinks Birinyi is spot on: “The VIX does a much better job at telling you what happened then predicting what will happen.”

So, what is the VIX telling us now then? Only that activity in the stock market remains unusually calm.

“The VIX is just a proxy for the volatility of a 30-day option in the S&P 500,” he says. “So, it is just saying volatility is low. In fact, volatility is getting crushed right now.”

http://www.minyanville.com/businessmarkets...&from=yahoo

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