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Registered User
Joined: 12/20/2004
Posts: 8
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I have not used the Vix before as an indicator. However, if I use the same interpretation of the chart that I would use for any other chart, I would have to say that the Vix tops (which are the bottoms for the market or stocks)has a mixed reading. Drawing a trend line from the tops of the Vix down to the right, I find a breakout to the downside. However, if I look at the MACD for the Vix the tops are in decending order which means to me that the momentum is fading for much of a further decline in the market.
If you have followed the Vix, is my interpretation correct or have I missed the boat.
thanks, john
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Registered User
Joined: 10/7/2004
Posts: 2,126
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QUOTE (jstjr) I have not used the Vix before as an indicator. However, if I use the same interpretation of the chart that I would use for any other chart, I would have to say that the Vix tops (which are the bottoms for the market or stocks)has a mixed reading. Drawing a trend line from the tops of the Vix down to the right, I find a breakout to the downside. However, if I look at the MACD for the Vix the tops are in decending order which means to me that the momentum is fading for much of a further decline in the market.
If you have followed the Vix, is my interpretation correct or have I missed the boat.
thanks, john
John the Vix in one of many indicators to try to solve the puzzle of people.
The market is about people, greed, and fear. People are moved by the things that surround them; tangible things. The price they have to pay for housing, food, gas, natural disasters, etc, etc. If you like to predict the markets, which I have tried and believe impossible, you may benefit from looking at the economic indicators that supposedly tell you how people are being affected by the tangible things that affect their life and their economy, and in retrospect how the economy is being affected by their reaction. VIX won't tell you much.
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Registered User
Joined: 10/17/2004
Posts: 43
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QUOTE (jstjr) I have not used the Vix before as an indicator. However, if I use the same interpretation of the chart that I would use for any other chart, I would have to say that the Vix tops (which are the bottoms for the market or stocks)has a mixed reading. Drawing a trend line from the tops of the Vix down to the right, I find a breakout to the downside. However, if I look at the MACD for the Vix the tops are in decending order which means to me that the momentum is fading for much of a further decline in the market.
If you have followed the Vix, is my interpretation correct or have I missed the boat.
thanks, john
The VIX is derived from the implied volatility on the CBOE from option prices for a basket of stocks. It does not predict market direction and has never traditionally been used with the type of analysis you are attempting here. The traditional VIX interpretation has been simple - when markets are bottoming the VIX will spike to high levels (vs it's recent trend)- this is due to panic buying of options to hedge market positions which drives option prices up and hence implied volatility of the market to anomalous levels.
Display the VIX-X on a line chart and use SP-500 or NDX--X as the comparision symbol. You will note that when the VIX spikes and then starts back down you see a bottom forming in the comparison index. It works pretty well (ESPECIALLY in hindsight  But minor changes in the VIX such as will be determined by divergence or momentum analysis don't tell you anything.
These spikes have called the bottoms pretty well throughout the post-Mar ༿ runup. You might look back a few years and see the implied volatility extremes associated with the ༽-02 bear and also note the general decline over the post-Mar ༿ runup (suggesting an increase in the "smugness factor" among market participants - which is troubling). I'd note that the VIX has not spiked yet during the most recent correction (not even to the level of last August's bottom) - suggesting an upturn is not yet in sight.
Finally I'd caution you that the VIX has become extremely popular in the last couple of years and relationships that become widely followed often lose their usefulness.
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 Gold Customer
Joined: 3/12/2005
Posts: 6
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Check out worden's notes 10/19/2004 in which a player has devised a timing tool using the VIX. Don Worden correctly pointed out that the indicator will fail when the market lifts off and runs (or the reverse) but I have looked back several years and it is excellent in a sideways "trading range" market. It often leads by a few days, which is helpful. Use stops!
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