I smooth it buy plotting it on a weekly chart and placing a 25 period 2% regression channel on it. When it goes above the channel the market is in for some very volatile times, below it and money goes into your pocket if you're long.
You can also just do an atr(14) on a daily chart. If you go by that the trend actually changed direction on 11/30 as it took out the previous intermediate high of 11/14. Volatile times are very close.
god, the idiocy continues "Wow up 8% to 10.75, now that is what I call manipulation, this indicator is useless just like most wall street created devices" loser trader meme 101 - "manipulation" what the VIX is, is a derived # that shows how much premium is being priced into SPX options. it is a function of what the option traders (who are managing risk, hedging, offsetting etc.) in the S&P (which is the proxy for overall market supply and demand) are willing to pay in regards to premium it's a measure of IMPLIED risk. iow, it's a measure of what traders are PAYING (or getting for their sales when they sell premium). manipulation has nothing to do with it. since premium goes up when the market is fearful, the VIX is an excellent measure of complacency, confidence, etc. the problem is when people try to reify it and make statements like "the market HAS to do X when the VIX is doing Y" which is just as retarded as people who think that "well, the RSI is overbought, so the market has to go down" what is equally stupid is when the VIX doesn't give you the Results you want (which is part of your error of confusing correlation with causality), then all of a sudden it's MANIPULATION. amateur trader thinking 101. the VIX is a tool to be incorporated into a trading philosophy. it also helps determine the best options and hedging strategy. hint: when the VIX is low, premium is cheap. when it is high, premium is expensive. that affects whether one is better buying or selling premium
The fact is that there are always more longs than shorts. Hence, there is a bias for individuals that are not risk-neutral to buy puts. That sets the price of option premiums. So VIX is the level of fear in individuals. Institutions don't have fear. They are risk-neutral. But marginally, mood swings in individuals do affect the market.
In dusting off the record books, Larry McMillan, president of New Jersey-based options-research firm McMillan Analysis Corp. said the behavior of the VIX 13 years ago seems remarkably similar to what the indicator is doing today. ........ "As the Christmas holiday approached in 1993, the VIX plummeted and closed at 9.30 on Dec. 22." wrote McMillan in his report "The Option Strategist." On successive days, it then finished at 9.47, 9.69 and 9.82 -- and never closed below the 10 reading again, ever, until Thursday, this week, he said. A similar pattern is currently emerging, bringing with it a period of stability which may actually prove to more extreme on the downside, he said. He noted the VIX quickly climbed above 12 after the new year, 1994. After a brief retreat, the VIX held these levels: 15 in early February, 16.50 in March 1994, and 24 on a Federal Reserve rate hike on April 1, 1994. "The stock market was generally moving lower over that time period, culminating with a spike downward to a low on April 1, 1994," McMillan wrote. VIX futures are now trading at higher prices than they were two weeks ago, even though VIX is making new lows. "Obviously, we are not alone in expecting VIX to rise in the early part of 2007," he said. "I think we are likely to see a return to normalcy in early 2007 with the VIX moving up off the lower end of its range," Ruffy said. "Some sort of catalyst would be necessary to cause a dramatic change in risk perceptions. It would be something totally unexpected and therefore impossible to predict." >> http://yahoo.reuters.com/news/artic...d=&cap=&sz=13&WTModLoc=HybArt-C1-ArticlePage3