How high can the S&P go?

QdzResurrection · Sep 20, 2003

I hate to be involved in a thread like this. I hold my peace for too long. Now I have to say that I think there is still 100% room for the year rally to go. Good luck to you.

Romeo · Sep 20, 2003

Quote from QdzResurrection:

I hate to be involved in a thread like this. I hold my peace for too long. Now I have to say that I think there is still 100% room for the year rally to go. Good luck to you.

Why do you "hate to be involved"? What's wrong with this thread?

I welcome your comments. You think the S&P is going how high this year?

Romeo · Sep 20, 2003

Quote from Mvic:

The vix is something that I would think would play a part in deciding what strike to sell in as much as when the vix is low it implies that volatility is low. However it will also mean that the premium will be relatively low.

If the vix shoots up it could be a good indicator to use for either exiting one's position or paying closer attention to the market. Also if not already in a position it would perhaps help in timing ones entry ie when vix shoots up to top of its recent range that would be the time to sell the options.

The vix is hovering around 20 now. What if it shoots up to 25? Does it have to go higher than 25 for it to be meaningful? Which type of reading would be considered bearish?

I appreciate your answers, and will rap this up in tidy fashion upon hearing them.

Pabst · Sep 20, 2003

Quote from Romeo:

The vix is hovering around 20 now. What if it shoots up to 25? Does it have to go higher than 25 for it to be meaningful? Which type of reading would be considered bearish?

I appreciate your answers, and will rap this up in tidy fashion upon hearing them.

Romeo,

I truly find the VIX useless as a directional indicator. It lags prices too much for me. Also, despite the mounds of empirical data that seemingly confirm that Moses dictated higher volatility =lower prices, I refuse to make that assumption.

That aside, if you think the markets going to break hard and be accompanied by a spike in implied vol., consider buying some put spreads instead of selling cheap call premo.

Romeo · Sep 20, 2003

Quote from Pabst:

Romeo,

I truly find the VIX useless as a directional indicator. It lags prices too much for me. Also, despite the mounds of empirical data that seemingly confirm that Moses dictated higher volatility =lower prices, I refuse to make that assumption.

That aside, if you think the markets going to break hard and be accompanied by a spike in implied vol., consider buying some put spreads instead of selling cheap call premo.

Well said, Pabst. I wanted to hear this guy's answers about vix. I see it the same way as you. Buying put spreads? Sounds like pain in just getting those things on!

Mvic · Sep 20, 2003

Quote from Romeo:

The vix is hovering around 20 now. What if it shoots up to 25? Does it have to go higher than 25 for it to be meaningful? Which type of reading would be considered bearish?

Well the conventional wisdom was that vix at lows meant a pull back or correction in the offing. The Vix is still trending down on the weekly so this may still prove to be correct but using the vix as a directional indicator the last few months has not been too helpful.

Again looking at the weekly chart (assuming we are thinking of selling straddle about a month prior to expiration) the vix is at its range low so maybe it would be worth waiting until it edged up to 21+ prior to selling the straddle. It "should" mean a higher premium (does it in reality?). If It shot up to 25 then that would probably be a great time to sell a straddle as on a TA basis it is at the top of its range of the last few months and look back the beginning of 2002 25 seems to be a significant level.

The likelihood is that either the vix starts trading down again back in to its range in which case you don't have much to worry about as the volatility value of the premium should be diminishing in both your puts and calls, or it breaks out of the range in which case the underlying will probably be making a significant move in one direction or the other which is also not such a bad thing using the hedging strategy mentioned earlier(where the main problem is chop not a strong trend).

Romeo · Sep 20, 2003

Quote from Mvic:

Well the conventional wisdom was that vix at lows meant a pull back or correction in the offing. The Vix is still trending down on the weekly so this may still prove to be correct but using the vix as a directional indicator the last few months has not been too helpful.

Again looking at the weekly chart (assuming we are thinking of selling straddle about a month prior to expiration) the vix is at its range low so maybe it would be worth waiting until it edged up to 21+ prior to selling the straddle. It "should" mean a higher premium (does it in reality?). If It shot up to 25 then that would probably be a great time to sell a straddle as on a TA basis it is at the top of its range of the last few months and look back the beginning of 2002 25 seems to be a significant level.

The likelihood is that either the vix starts trading down again back in to its range in which case you don't have much to worry about as the volatility value of the premium should be diminishing in both your puts and calls, or it breaks out of the range in which case the underlying will probably be making a significant move in one direction or the other which is also not such a bad thing using the hedging strategy mentioned earlier(where the main problem is chop not a strong trend).

Romeo · Sep 21, 2003

Quote from Mvic:

Well the conventional wisdom was that vix at lows meant a pull back or correction in the offing. The Vix is still trending down on the weekly so this may still prove to be correct but using the vix as a directional indicator the last few months has not been too helpful.

Again looking at the weekly chart (assuming we are thinking of selling straddle about a month prior to expiration) the vix is at its range low so maybe it would be worth waiting until it edged up to 21+ prior to selling the straddle. It "should" mean a higher premium (does it in reality?). If It shot up to 25 then that would probably be a great time to sell a straddle as on a TA basis it is at the top of its range of the last few months and look back the beginning of 2002 25 seems to be a significant level.

The likelihood is that either the vix starts trading down again back in to its range in which case you don't have much to worry about as the volatility value of the premium should be diminishing in both your puts and calls, or it breaks out of the range in which case the underlying will probably be making a significant move in one direction or the other which is also not such a bad thing using the hedging strategy mentioned earlier(where the main problem is chop not a strong trend).

to my first response. It was more than just a face.

I was saying that the vix needs to go over 25 for me to believe that the volatility is on the rise, and that a significant move is approaching. Unfortunately, the vix below 20 is not the indicator it used to be.

Mvic · Sep 21, 2003

the Vix is not what it was. Should be interesting to see what happens and if it takes on more relevance when it becomes tradable in the not too distant future.

theplumber · Sep 21, 2003

I'll take a stab at this, for entertainment purposes only. The screenshot shows Gann's Square of nine and some of the projected cycles I came up with this past year. It shows a possible square out Sept 23 at 1050 but the cycles haven't been exact lately for me. My projection off the March 12 2003 lows was 946 but that changed (based on my lack of cycle knowledge at the time) and is now 1073. My geometry and astro together yield either Sept 26 or Oct 2 for a high for the year. My work also says the VIX to the low historical range of 10-15 but I find that hard to believe after reading Barrons and the increase in margin debt for the Nasdaq.

How high can the S&P go?

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