Friday, January 26, 2007

What to Expect from a VIX Spike

Some things to think about while considering how far and how fast the current VIX spike move will go:

  1. Most VIX moves up are of one of three durations: 1 day; 3-5 days; or 2-4 weeks. A VIX spike up for 3-4 days is fairly common, but there is no reason to expect it to end there.

  2. The magnitude of most sharp VIX spikes is at least 20-30% -- and yesterday was only 13%, so don't expect we are done from that perspective either.

  3. As to my target VIX highs in the short to intermediate term, I expect we will go at least to the 39 week SMA of 12.85, more likely to the 14-15 range. That being said, I would not at all be surprised to see something along the lines of the meltdown of May-July 2006, where the VIX traded north of 20.
A look at the weekly chart of the VIX should give you a visceral sense of how sharp of a move is possible.

2 comments:

Anonymous said...

Good blog, bobo.

Jaye

Brian said...

Nice post, as usual. I am becoming a regular reader.

Brian

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