Tuesday, November 1, 2011

10-30-2011 watching the VIX

Update 11-01-2011

Friday was a mixed day - only the DOW was down I believe.  So we now have 3 down days in a row on the DOW.  I suppose this could be taken as a confirmation of a VIX trend change signal.  I prefer 3 days with the major indexes (DOW, S&P, NAZ) all down as a confirmation - but would not argue if you said it was a confirmation.

Original post:

If you look at a Bell curve  2 standard deviations from the center covers 95% of the population.  Now if we apply that to the VIX  a move up in the VIX of 95% from a bottom or down 47.5%  from a top should indicate an extreme move.  The VIX has now moved down over 47.5% from its high around 48 - so we suspect a high is near (or may have already been reached).

To be on the safe side though we would like confirmation to call a trend change.  Back testing shows that if we get 3 red days in a row that this provides confirmation of a trend change to down.  So we are waiting that to confirm a VIX trend change signal.

Confused?  Reference prior posts on this topic.

No comments:

Post a Comment