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Monday, April 23, 2012

VIX Moving In Line with FVE

 - I am surprised as to how closely VIX is moving in line with FVE.  I realize that the FVE model was created to provide a "fair value" level for VIX...but in the past, VIX moved considerably over or under FVE's value.  The disparity between the two was good in the sense that it provided for excellent opportunities to go long or short VIX & VIX related instruments relative to the FVE.  Unfortunately, I'm not seeing to many of those opportunities during the past several weeks.

- As for SPY, the chart shows that SPY is continuing its downtrend--having broken below the mid-term rising trendline.  While the market correction is likely to continue, the rate of the fall has not been very steep, thus would likely limit volatility from rising sharply.

Monday, April 16, 2012

VIX to 25 or to 15?

- SPY price has been caught in between the short-term trend resistance line and the mid-term bullish support line for the past week.  It is because of this convergence of trend lines that I anticipated last week that VIX could see a pause from its recent ascent.

- While FVE indicator is still showing an uptrend, the pace of its trend has slowed as well, just as the trend of VIX & SPY has come to a pause.

- The question now is--Will VIX move higher to just above 25 or back down to 15?  Unfortunately, I will not bother trying to predict what volatility will do when the situation calls for a coin flip.  But I would imagine that new developments out of Europe and fresh economic indicators would point the way...and do so in the next few day...


Tuesday, April 10, 2012

Snapshot of FVE Indicators & More.

- As expected, volatility rose at a quicker pace the past two days.  Both VIX & VIX April Futures have risen above FVE & FVE Futures indicators, respectively.  This is very common and as you can see from the second chart, VIX Front-month Futures can easily go greater than 10% above FVE Futures indicator.

- Still, I wouldn't be surprised if volatility stops for a moment to catch its breath--considering short-term channel trendlines on both VIX Futures and SPY.

- Admittedly, the technical picture in SPY looks mixed.  In the short-term, SPY has approached what looks like a significant support range 134.3 - 135.7.  However, when we look at the longer-term channel lines, SPY seems vulnerable to much further decline, technically speaking.

Wednesday, April 4, 2012

VIX Futures Trying to Break Up

Since the last post, VIX April Futures has tried 3 times to break out of it's recent closing high of 18.35, only to be hammered down intraday to under 18.

1)  On 3/28, VIX Futures rose as high as 19.2 before DIA touched its 20-day exponential moving average (EMA) support and bounced up causing VIX Futures to plunge back to 17.65.
2) On 3/29, VIX Futures hit a high of 18.8 before SPY touched its 20-day EMA support and bounced up, causing again VIX Futures to plunge back to close at 17.3.  3) Finally, today 4/4, VIX Futures rose as high as 18.9 before QQQ touched its 20-day EMA support and bounced up, causing VIX Futures to drop a 3rd time to close at 17.9.

I think it's safe to say that volatility will have a hard time breaking upward until the 20-day EMA is broken on all 3 ETFs, DIA, SPY, & QQQ.  Yet, Fair Volatility Estimate Indicator has been rising slowly but steadily.  It's hard to predict what will happen in the future, but should the 20-day EMA supports break, one could expect a quicker rise in volatility.  As of 4/4, FVE's value is 16.84 compared to VIX closing value of 16.44.  FVE for VIX Futures was at 17.97, while the April VIX Futures closed at 17.9.