CBOE Volatility Index - VIX - Daily versus SPY (S&P500 SPDR)
Sharp DROPS IN VIX have always been RE-TESTED
1. Look for sharp drop in VIX after a spike (Note: This is usually accompanied by a rally in stocks) 2. As soon as there is a 75% retracement of VIX, mark the level of stock prices. 3. The market will revisit this level once the short-covering euphoria is over. 4. See all examples. The last one completely blew up.
So, It looks like this is a very reliable read on VIX and what it means for the future of the S&P500.
Tim 3:03PM October 21, 2014
NOTE: THIS DATA IS ONLY THROUGH YESTERDAY'S CLOSE - FOCUS ON THE OLD SIGNALS
Yorumlar
timwest
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I hope this can give you an extra "HIDDEN LEVEL" in the market to find "KEY SUPPORT" where others fail to see it.
KRSCBOE
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Tim, can I call u this afternoon?
KRSCBOE
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Tim, I'm not sure I understand. Is this chart saying that the lows will be tested?
timwest
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The last time it was fully retraced. In a bull market, it seems that the 75% retracement level gets retested after the upside momentum wears off. It becomes a natural "support level" on pullbacks. It means that you don't have to chase the market any further up once the VIX comes back 75% from the spike. It's not perfect, but it's a decent indicator or where support is in the market.
KRSCBOE
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thx!
Will_Wong
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Not sure I understood you. Last Thursday on 10/16/2014, the VIX topped out at about 30. Over the next three sessions, it proceeded to drop sharply (accompanied by a sharp rise in stock prices). Presumably it bottomed on 10/21/2014 and today it started going up again (accompanied by a drop of the stock market as well). if VIX continue to retrace to 75% of the drop (from 10/16 to 10/21), the stock market will also drop accordingly. We are to note the stock price when the VIX retraced 75% of the drop. You said that in the future when the upside momentum wears off the stock market will revisit this value again and this becomes a support. In putting my thoughts to words, I think I am starting to understand your logic. Does this capture the essence of what you were trying to say? Thanks!
timwest
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Yes, the level of buying that drives the market up and correspondingly drops VIX back down 75% of the run-up is a strong level of support.
Will_Wong
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You mentioned in another post that the 75% retracement of the VIX will correspond to a 1940 for the SPX (actually 194 for the SPY). Is that correct?