Historic VIX

Discussion in 'Technical Analysis' started by dbTrader, Aug 18, 2003.

  1. Does anyone out there trade based on this indicator and what is the concensus opinion on the fact that it is at a historic low.

    Background: VIX is the Chicago Board Options Exchange's Market Volatility Index -- a key stock market gauge of investor anxiety. High readings show fear, Low readings show confidence.
    Several times in the past extremely low readings (under -20%)precede downturns in the S&P and extremely high readings(over +20%) precede recoveries.
  2. I watch it every day hoping that a change in trend as signaled by the adx will signal a down turn, which by the way ain't happening.

    In "Practical Speculation", Niederhoffer and Kenner have done a statistical analysis of the vix and its relation to the s&p 500 and they now they call it "their favorite indicator".

    On page 355 there is a true story written by me entitled The Hoodooman. I figured that if the story were that good then maybe I should use "hoodooman" as my "handle" on elite trader.

  3. The VIX is not at a historic low. The VIX has been under 10 in 1992 if I recollect. Go to the CBOE website....they have all the past data on VIX.

  4. Sorry -- "historic" refers back 10 years max.
  5. I posted these stats last year around this time regarding the seasonal volatility cycle in VIX.

    2002: VIX(L) 30.46(8/22/02) VIX(H) 46.29(10/10/02) +49.52%

    2001: VIX(L) 22.44(8/27/01) VIX(H) 57.13(9/21/01) +155.39%

    2000: VIX(L) 23.11(8/28/00) VIX(H) 30.82(10/13/00) +69.06%

    1999: VIX(L) 26.12(8/25/99) VIX(H) 31.45(10/15/99) +52.29%

    1998: VIX(L) 26.25(8/3/98) VIX(H) 48.56(10/8/98) +85.00%

    In 1998, VIX actually bottomed in mid July and some macro forces were in effect at the time. Note that the VIX bottomed 8/22/02; 8/27/01; 8/28/00; 8/25/99. So we are about a week away from that time period right now
  6. Its probably just a question of semantics. On a relative basis, yeah this is very low considering the fundamental risks in this market, especially in light of the bond markets collapse. But, again, this is part of the seasonal cycle as the stats I posted above indicate. Volatility is compressed until "they" begin to start hedging in a signiciant way to either lock in gains on their performance from the first 3/4's of the year or an exogenous event hits at this seasonally fragile time of year. Right now, the low volume is sort of distorting the tape, so I would look for something significant between August 25th-30th.
  7. There may well be a seasonal tendency for VIX to rise/fall at certain times of the year. Kind of like there is a seasonal tendency for August to be a weak month....etc etc.

    I find it interesting though to contemplate the last time we made a big move down in VIX. That was following the last Gulf War. Turns out we dropped under 10 on VIX in 1993. If memory serves I believe 20 became a "ceiling" in VIX then for the next several years...perhaps until 1996-1997.

    The exact numbers by day are available at www.cboe.com....all the way back to the beginning of VIX, not just the last few years.

    If you think back to the last few years, is it within your imagination to think that IF we don't have another 9/11, anthrax attacks, another mideast war, that perhaps the "range" of VIX will rachet itself lower. In other words, instead of 20 being low, perhaps another number will be low.....let's just say 15. Perhaps 25-30 will be high instead of 40 or 50.

    I throw this out there because the world changes....and yet we as traders sometimes fixate on what has happened in the most recent few years, and then extrapolate that into the future. A big mistake. Why there is no holy grail....because there is always something a little different.

    VIX in my opinion is not a fear/complacency indicator as some technicians would have you believe. It is simply the markets perception of volatility. It is true that the VIX tends to be "low" at market peaks, and "high" at market bottoms. But those are relative terms. As I mentioned above, there was a period of several years where the "high" on VIX was around 20.

  8. Trajan


    I agree with this, and while Vultures numbers maybe be right for the short term, I think it will return to the range Oldtrader describes. I'm seeing it right now.
  9. Absolute ^VIX values are not that important.
    ^VIX is weak the last 4months and may be even lower.
    Do not expect a quick reaction, because it touched 20, we are not in the bearish market 2000-2003.
    BTW, if there are numerous ^VIX [Long only] systems with better than +600% profits since Jan2000, is there any reason to search for a probable low around 20 ?
    Take a look, for example, at
    It runs at +630%, 67trades/41winners/26losers, max system drawdown -46% and 57% exposure.
    The system was "buy" on April10, 2002 low [19.01], but this was not the main reason of the profitability.
  10. You cannot just look at VIX as an ABSOLUTE NUMBER. To do so would be totally meaningless.

    As can be found on "other" threads, the Connors VIX Method of using moving averages and RSI can help a trader pin-down a 2-3 day reversal, given a pretty concrete methodology.

    It's true, the VIX trading below 20 is meaningless unless you are able to observe it in relation to the RSI, 10 and 21 day moving averages, etc. and how it behaves in relation to them.

    ie.) The Connors Method looks for a close that is 10% below the 10-day moving average, along with the intra-day HIGH being less than the moving average, and an RSI that is overbought for the ANTICIPATION of a SELL SIGNAL.

    Yesterday, we got to within .08 of a sell signal.
    The 10-day MA was 21.28 and 10% of that gave you 19.15

    Yesterday's close was 19.23
    Close, but no cigar!
    #10     Aug 19, 2003