http://www.geocities.com/afleance/qqqvsvixvxn042203.html How low can we go in a straight line down? VIX down another 3%, and it is now 34% below 200dma. The Relative VIX is 0.66 At least we got a strong rally in conjuction with the VIX tank. We've had other days where the VIX drops 5% and the indexes are breakeven or down. The cliffdiving VIX is making me nervous chasing the momentum. I've been playing things close to the vest lately, playing mostly company specific plays rather than trying to make plays on overall market.
this vix and qqv drop is driving me crazy, last week i was sure this market was about to tank with the way the vix qqv were dropping. now with better earnings i'm not so sure if we hit the bottom of these indicators
By Alan Farley, Special to RealMoney.com The multiyear rally turned most investors into bull market geniuses by the end of the 1990s. This twisted logic drove that secular advance, and the situation fostered a reckless attitude that led to the destruction of many retirement accounts. If you need a quick primer on the line of thinking spawned by bull market genius, here goes. Price-to-earnings ratios don't matter anymore, because this is the New Age of Capitalism. Buy the dip whenever a stock falls, because it will always come back and move higher. The good times will last until 2015, when baby boomers crack open their fabulous 401(k)s. No doubt we've learned many hard lessons over the past three years. In the process, a new critter has started to grow from the ashes of our diminished wealth. This dangerous animal is just as confident about the future as the bull market geniuses of the past were. But these gloomy whiz kids can't see anything but darkness at the end of the tunnel. Bear market genius is now having its day on Wall Street. This inverted mindset finds the negative view in each uptick and sees no outcome except oblivion. But this flawed assessment will fail in the same way its bullish twin did. And the time has come to challenge one of the pillars of its negative logic. Bear market geniuses couldn't spell VIX two years ago, but it's now at the center of their gloomy predictions. They're hanging their hats on a popular strategy that calls for a selloff whenever the VIX drops more than 10% below its short-term moving average. We hit that sell signal last week, so the bears are waiting for the market to take a nose dive. The problem is that the indicator can respond to longer-term cycles as well as shorter-term ones. As we'll see in a moment, there's solid evidence that broader-scale movement is now taking control. There are many ways the VIX can respond to short-term sell signals while equities move higher over time. The most common scenario would be a series of small reversals that shakes out weak hands but keeps prices intact on the stocks and indices. This process would also bring down short-term VIX averages and let the indicator continue its spiral toward lower levels. Bears point to declining volatility as a sign that the rally off the October lows has run its course. But they're blind to seasonal cycles that carry the indictor lower into the summer months year after year. They've become so jaded that every positive sign draws a negative conclusion. But the day is coming when it'll be a mistake to trade against good news. The VIX reached its annual low during the summer months in four of the last five years. What about that aberrant reading in March 2002? I recall a shocking event that took place about six months before this reading: Sept. 11, 2001, likely shifted the natural volatility cycles for that year alone.
Seasonality supports the conclusion that VIX contraction won't lead to a nasty market decline. Rather, the indicator will continue its reversion to the mean by dropping back toward expected seasonal levels. This would support higher market prices and a typical summer rally Let's approach VIX prediction from one more perspective. The indicator is subject to both swing and momentum phases, just like an individual stock or index. An MACD (moving average convergence-divergence) reading is a valuable tool to measure these alternating phases because of the way it compares performance of a shorter-term average with that of a longer-term one. Place a 10-50-10 MACD under a five-year VIX chart and track the output over the last five years. Do you see what happens when long-term cycles take control from short-term ones? The VIX looks like it's starting a momentum move to the downside. Compare the current MACD readings with prior thrusts below the center line in recent years. The decline might continue until it reaches the historical lows, which are marked by the extremes at the bottom of the plot. This would take us into the middle of summertime. It makes a lot of sense, given the VIX's well-documented seasonality. Let me make one thing clear before I get a ton of emails: I'm not expecting a bull market in all of its prebubble glory. My view of the future tracks the observations I made in a column last September. I expect the next move higher to be just be a countertrend rally in the middle of a secular bear market. But the equity charts have a more bullish look than they did last year at this time. The path of least resistance into the summer months is clearly up, not down, from these price levels. http://messages.yahoo.com/bbs?action=m&board=7076650&tid=bprx&mid=46863&sid=7076650
I agree. This next down-leg is going to shake out the last few straggglers left over from the Bubble and maybe teach some newbies a thing or two. I'm still waiting for the news to 'hit'. Just a thought, triple
Meanwhile this rally is shaking out all the shorts who sold when the VIX got really low last week. When that's done, it will fall. kp
http://www.geocities.com/afleance/qqqvsvixvxn042503.html VIX 23.90 +0.61 finally had an up day today, although relative VIX (VIX/200dma(VIX)) is still low 23.90/35.52 = 0.67 Wednesday was a good time to average into some shorts, with VIX having gone straight down and SOX with 7 straight up days. The tech stocks which had weaker earnings, e.g. semiequips KLAC NVLS AMAT, were esp. hard hit by profit taking. SOX -5% today. Fleance
during the 2 market swings today it was interesting to follow the VIX. very complacent during the uptrend in the first half hour, however, it shot up almost .75 points when the market started to retreat. i know this is a very small sample(about hour worth of trading)....but it could be a sell signal, at least for today