I am starting to think that given all the optimism and all the shorts switching to the long side, that perhaps, just perhaps, this is the rally that we talked about a month or two ago about how it would pull all the longs back in and even get shorts running for cover, and then, BAM!, it was just a trap to get more money into the market to get crushed. It even sucked Waxie in and some of the best TA folks into believing this rally has legs
I am watching todays action very carefully. I'm not sayin', I'm just sayin'...
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i am going to create a mathmatical formula in relation to the vix vrs spx.
ReplyDeletewonder if ya already have some of this, for a heads up.
I am going to calculate how much the market moves, in relation to the vix, per day on average.
the what the results are when its very skewed and OUTside the range (like today)
last time we saw this divergance, was feb 18.....next trading day, feb 20th..was a bloodbath
Dude, I have been trying to figure out a formula on the VIX, its moving averages, and the SPX for weeks. I really have not come up with anything. Trust me, the market movement does not always match the VIX. On some big down days, VIX will go up just a couple of points. ON a day the market moves half as much, the VIX may go up twice as much as before. Today, the market goes up, the VIX goes up.
ReplyDeleteThere is a common theme though. The further below the 20dma the VIX is, the more likely it will go up higher, even on an up day in the market.
So, as you do your formula, you have to take into account the delta of the VIX and its 20dma because as it diverges, it becomes more subject to change. This is one of the constants with the VIX and one of the keys to understanding the VIX. It does not like to move from its 20dma and will almost always run back when it gets too far away.