Still have faith in the VIX?

we post these VIX charts with the aid of T/A on our website. For respect of elite trader we wont spam anyone with the name of our swingtrading company.
IF interested pls PM us.

these 2 charts tell us that the VIX is low BUT can and probably will go lower....we simply use them as a guide.

we try to teach people to 'read on the fly'. keep the VIX & VXN in mind...watch them but dont short JUST BECAUSE....short because the mkt gives you a signal such as a breaking of support on the OEX, etc etc.

One thing that stands out from many posts I've read and am in 100% agreement with is that to truely make money trading one must be hedged. Perhaps not at all times, but certainly in these present times.

then obviously you make money on both sides of the mkt & it helps you to sleep better at nite.
 

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I've gotten a sense of posters thinking about the VIX in very short time-frames, and just wanted to make a quick note - the "contrarian" VIX Low Is Bearish (tm) theory is very macro (for lack of a better word). It's more talking about general market direction over the next 6 months than market direction on Monday morning.
 
I tend to disagree that the VIX or any sentiment indicator is macro per se. The macro environment right now could be looked at in either a glass half full or half empty frame of mind.

Half full puts emphasis on things like GDP growth, productivity, benign inflation, consumers holding up, etc.

Half empty is just as persuasive an arguement. Lackluster job growth, sky high bankruptcies, international tensions, huge deficits, FRE/FNM debacles, etc.

It's not the events that determine the VIX, it's pure emotion. Everyone simply hopes the glass is half full.
 
In the LA times this morning, what do you know, on the front page of the business section, I see a story about sentiment and (gasp!) the low VIX reading. Then the market "pros" go on to explain how the VIX may not be as reliable as it has in the past.

They even give the analogy to the January effect. Once everyone knows about it, then it loses its predictive power. So when everyone knows about the VIX, it also loses its power.

Sorry, but that is a ridiculous analogy IMO. Not because I'm a huge fan of the VIX (it's a nice indicator but not the holy grail). It's ridiculous because the January effect and the VIX carry two completely different underlying meanings.

The January Effect, the dogs of the DOW, those methods didn't rely on emotions and pyschology. Those methods were much easier to implement than going against the crowd, going against your gut instincts, having iron discipline and buying when the VIX was over 50 (and over 2 standard deviations from its mean).
 
Could the explosion be to the upside...?



What is true is that a bottom on the $VIX chart precedes a market explosion. If you think of this as a contrarian, you will see that it must be true. What does a low $VIX mean? It means that sellers of options are aggressive, that buyers of options are timid and therefore options are "cheap." In fact, these option traders don't expect the market to do much in the forthcoming days or weeks--that's why they let the air out of the options, making $VIX very low.

A contrarian knows what happens when a consensus is reached: the opposite! Well, what is the opposite of "...don't expect the market to do much?" It's a market explosion, of course. And the fact is that market explosions can occur in either direction. In the last few years, since we've been in a bear market, those explosions have come on the downside. But back in the 1990s, during the bull market, such explosions often came on the upside.

Therefore, to say that a low $VIX is bearish is wrong. Understanding that will separate you from most of the $VIX pretender-analysts out there.
 
Quote from jbtrader23:

I'm sure the perma bull market strategists have all but forgotten about the low VIX readings. They are too busy being optimistic about a "second half recovery" and the "productivity boom" to pay attention to any sentiment readings.

It's been between 25 and 19 now for 4 months. If you pull up a 5 year weekly VIX chart with Bollinger Bands, you'll see the bands are starting to tighten (just as they have before other major sell offs in the past few years). If you add RSI and MACD to the chart, you'll see how low they've gotten. The lowest RSI readings in 5 years! Major complacency.
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Averages are helpful;
actually like to look at lots of averages, moving averages,DIA, SPY QQQ, VIX,and so on.

Unless one is actually trading the exact instruments in the average;
they are all helpful,but secondary to price

:cool:

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''The honor of kings is to search out a matter''-Solomon ,trader king.
 
The most any indicator or system can offer is a slight edge. No offense to anyone, but how can you say VIX is no longer any "good" because it gives a couple of bad signals? Over time and with proper interpretation, see the Connors material, VIX has been about as good as it gets. Connors gives win percentages in the high 60's for most of his VIX signals. His way of scoring wins is very easy as well, so you are not exactly looking at an infallible indicator, just one with a very good record.
 
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