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Sunday, March 15, 2009

When both SPX and VIX up on the day

Here's a simple back test on what had happened when both SPX and VIX are up on the day. Basically, in the recent bear market, if this kind of thing happens on Friday, the next week tends to close in red.

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15 comments:

  1. Excellent work......!!!!!

    Thanks


    daveM

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  2. Post hoc ergo propter hoc

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  3. This comment has been removed by a blog administrator.

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  4. Anonymous 10:50: The spreadsheet is a mere observation. Cobra statement does not imply any certainity. Nothing in technical analysis is ever a 'proven' prediction. There are too many variables. What makes Cobras work attractive are his many pointers to what might be a sign of the market moving in a certain direction. If you believe exclusively in Random Walk and MIT theories, you will never feel at ease with technical analysis.

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  5. Is there an edge if both SPX and VIX are down for the day then?

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  6. Well now,

    Say I knew anything about T.A. I would want the indicator outperform the relative behavior of the market.

    Else, in a bear market 5 days after a Wed the market will be down...

    but you used the words "random walk" and said MIT... so you must be right.

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  7. Hi Cobra, Another brilliant piece of work. thanks for this. When I did my research on (about 8 years of data) the weekly dow/sp500 gain stats, I found that if market raises more than 2% for a given week, the following week is likely be a big pull back or closes in red. I can see only very few exception to this. last week market raised more than 10% which I donot think will be able to sustain.

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  8. Hi, have you looked at bull rally starting in March 2003? I don't remember this in particular, but I know may sentiment indicators failed at the time.

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  9. Did you notice that this VIX-SPX rule always seems to produce a gap down?

    We had a gap up today.

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  10. Cobra:

    You are the best! Thank you so much for your objective analysis.

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  11. Sorry, guys, had a very busy day, now very tired. I got the back test data from my forum (someone did the back test and I just "borrowed" the image), I myself cannot do such kind of back test yet, so don't know how "both SPX and VIX up" behaved in the past.

    There's not much cases about "both SPX and VIX down", so no solid conclusion. I raised the same question in my forum last year, again someone did the reach for me, so I know there's no solid edge about it.

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  12. Papu, thanks for the research, I'll sure remember the results!

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  13. I see this price action as a divergence and as indicator of a potential reversal. I noticed this too.

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  14. I am believe this year,maybe before summer vix to see in 140-160,¿Horror crash?

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