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VIX/S&P Correlation is off the chart


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#1 Rogerdodger

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Posted 26 April 2019 - 08:57 AM

Tom McClellan commented on this one.

It looks like that at least it needs to drop back to below -0.75, before any good rally can start.tom.jpg


Edited by Rogerdodger, 26 April 2019 - 09:03 AM.


#2 opinionated

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Posted 26 April 2019 - 09:51 AM

Waiting for the swing short 4-6 % but trying to wait till end of quarter. Im thinking next Tuesday might be the sweet spot. I know all I keep reading is short, short and we know what that creates.

Thanks for the share RD

#3 tsharp

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Posted 26 April 2019 - 03:45 PM

Tom also weighed in on the RASI in yesterday's letter:

 

The basic point which matters right now is that the ability of the RASI to climb up to a nice lofty value conveys an important message.  It says that liquidity is plentiful, and that is a condition which is likely to continue for a while longer.  A high RASI reading says that there is still more uptrend yet to come.  There might be an ordinary, garden-variety correction to help restore equilibrium, but we are not at the end point for the uptrend. 

 

Final price highs do not typically arrive with the RASI up above +500.  The time to worry is when we are seeing prices moving to new all-time highs but the RASI is down below +500.  This is especially important when there is a normal correction which takes the RASI down below +500, and then it fails to climb back above +500 on the ensuing rally.  That is a big invitation to trouble.

 

But it is not at all what we are seeing now.  The RASI is up at +1005 as of April 24, so it is a long way from decaying down to the point where it would be signaling a problematic loss of liquidity for the stock market.  An ordinary correction can still appear at any time, and we have to accept that and be ready for it, but this is not the end of the uptrend.  And that is a really nice piece of information to have the market give to us.

 

RASI-April2019.gif

 

 

My work says higher, then a pullback:

 

 

SPX-D-4-26-19.jpg


Edited by tsharp, 26 April 2019 - 03:45 PM.


#4 Darris

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Posted 26 April 2019 - 05:59 PM

OTOH, the NYSE Summation index at 1250 in April 2010 did not give a warning as the SPX dropped 20% over a two month time frame.  We are up 200% from that low though, 9 years later.  Never know what the month of May may bring.  May 2012 was rough as well, but the summation had been drifting down from 1250 for months.  That VIX correlation gave some nasty predictions the last 20 years.