How do you measure "soon" in a trading system? If I can't measure it and calculate it I don't use it.
There's one problem with this idea...VIX may drop to only 11 or so before it spikes back up into the 20s. So while waiting for the absolute bottom, you might miss the bottom entirely.
Has anyone back tested using VIX as an indicator for going long or short the market? From what I've read it's a very poor indicator of tops and bottoms.
I think it would be better to think of VIX not as an indicator of a top or bottom of the SP, or an indicator of near-term equity movements, but rather the comfort level of sentiment. Right now, the VIX is in the bottom of it's historical range. I've been following an options trader and what he does, and he's been bemoaning this low volatility environment we've been in for a while now. All the options he follows are currently low vola, and he thrives when vola is much higher than it currently is. I've been keeping an eye on the correlation between VX future, bonds and the equity indices, and so far no joy. But I AM noticing that the VIX is looking like a good place to long now. Might take some heat for a while for as long as it stays low, but for sure the thing is going to pop up again. It is inevitable. Too bad I do not yet understand the contango of the different VX expirations vs $VIX. Looks like November VX is rolling to December, and the Nov VX is dropping quickly now. Dec not so much. Like a 2 point spread IIRC as of yesterday.