17 replies to this topic

[airedale88]

i see no useful correlation using vix when observing it's history since inception. in early 95 vix chopped around in the 11 area. SPX was below 500. SPX made a pretty much straight move up to over 900 by oct 97 and vix moved up to peak over 38. SPX moved higher into fall 98 as vix declined and chopped around between 18 and 24. SPX sold off sharply into it's oct 98 low and vix spiked to 44. by august 2000 vix had chopped it's way down to below 17 as SPX topped at 1517. no consistent correlation. worthless IMO for timing.

[n83]

the last time the vix went from 8 to 50.....the dow went from 3000 to 12000.......soo.....the next time the vix gets to 50 i suspect the dow will be around 30k.......

This is simply not true, actually very wrong and misleading, the implied volatility increases ahead of the declines and continues to increase during the declines, it declines during the rallies. There is probably no single instance where the VIX goes above 25 and continues to increase that the market did not follow a significant decline such as a correction or crash, it is not the case at the moment though...

agree kisa

surprised at the extrapolation made by some

Edited by n83, 02 May 2007 - 05:05 AM.

[Russ]

the last time the vix went from 8 to 50.....the dow went from 3000 to 12000.......soo.....the next time the vix gets to 50 i suspect the dow will be around 30k.......

This is simply not true, actually very wrong and misleading, the implied volatility increases ahead of the declines and continues to increase during the declines, it declines during the rallies. There is probably no single instance where the VIX goes above 25 and continues to increase that the market did not follow a significant decline such as a correction or crash, it is not the case at the moment though...

agree kisa

surprised at the extrapolation made by some

I took it to mean that if the dow went to 30K then the following crash would push the vix over 50, but I don't know if Don meant it that way.

Russ

[da_cheif]

the last time the vix went from 8 to 50.....the dow went from 3000 to 12000.......soo.....the next time the vix gets to 50 i suspect the dow will be around 30k.......

This is simply not true, actually very wrong and misleading, the implied volatility increases ahead of the declines and continues to increase during the declines, it declines during the rallies. There is probably no single instance where the VIX goes above 25 and continues to increase that the market did not follow a significant decline such as a correction or crash, it is not the case at the moment though...

agree kisa

surprised at the extrapolation made by some

I took it to mean that if the dow went to 30K then the following crash would push the vix over 50, but I don't know if Don meant it that way.

Russ

of course the markets going to crash......its crashed many times over the last 80 years.....geeziz. eh.....the next crash could be 10000 pts.....all the way back to 20 k........

the last time the vix went from 8 to 50.....the dow went from 3000 to 12000.......soo.....the next time the vix gets to 50 i suspect the dow will be around 30k.......

This is simply not true, actually very wrong and misleading, the implied volatility increases ahead of the declines and continues to increase during the declines, it declines during the rallies. There is probably no single instance where the VIX goes above 25 and continues to increase that the market did not follow a significant decline such as a correction or crash, it is not the case at the moment though...

agree kisa

surprised at the extrapolation made by some

and im not surprised at ur response.......

[BearItch]

Aire -- Should be interesting to see if the rest of the other averages give the same indications as the RUT.

[arbman]

i see no useful correlation using vix when observing it's history since inception.

This is because you are not looking at it the right way imho. There are two components to VIX, the actual volatility and the implied volatility or the premium for risk. When the volatility increases (and that's usually long term bearish since it means drying liquidity), the VIX simply moves up with it, but not necessarily with the added risk premium, you need to track whether the two are in correlation. I compare the two all the time and it almost always gave me exact top signals. But you do not believe the tops can be predicted either...

Looking at the VIX all by itself without regard to the underlying volatility is simply not the right way to evaluate the risk and you can not do this simply by eye, you have to crunch a few more numbers and compare. However, even if you take the 20 dma and its standard deviations, you get very reliable volatility signals in the IT frames. Marketneutral had an indicator similar to this concept (an oscillator based on the VIX extremes) and almost always nailed the market tops and bottoms consistently for years, it is all in the archives, he even gave away the Excel spreadsheet at some point...

of course the markets going to crash......its crashed many times over the last 80 years.....geeziz. eh.....the next crash could be 10000 pts.....all the way back to 20 k........

Yes, it will go to 30k, it will even go to 100k, all in due time

It is silly to be long term bearish while the world population is still growing, every new born baby means more labor force eventually and accumulated debt. I believe we have already covered when this ponzi scheme will also end...

Edited by kisacik, 02 May 2007 - 10:08 AM.

[airedale88]

"I compare the two all the time and it almost always gave me exact top signals. But you do not believe the tops can be predicted either..." kisa, was this a leading indicator or a coincident indicator? i'd be interested in seeing it displayed. thnx.

[arbman]

It is usually a leading indicator usually in my experience, but it is at least a coincident indicator, definitely not lagging. I'll prepare and post something soon. BTW, there was also a huge jump in the credit spreads on the Apr 30th, a sell off was imminent...