Sunday, April 1, 2007

VWSI at 0…and to Drink?

The VIX Weekly Sentiment Indicator (VWSI) is back at an even zero this week, which the fourth week in a row (i.e., each week since the week of 2/27) that it has been safely in the neutral zone in terms of future bias.

I normally pay very little attention to the VIX weekly chart, but I noticed that this past week was the fifth week in a row that the VIX end of week price changed by more than ten percent from the previous week. In my quick scan of the archives, I could only find two other times that this has happened before: in September-October 1999; and August-September 2001. One was an instance when the voices calling for a top were quite loud and increasingly persuasive; the other, of course, was associated with the events of 9/11.

Note that the current volatility in the VIX weekly price movements looks a lot like a pendulum that has been running out of momentum over the past five weeks: +75%; -24%; +19%; -23%; and +13%. If historical patterns repeat themselves, the VIX will move less than 10% in one direction or the other in the coming week.

(Note that in the above temperature gauge, the "bullish" and "bearish" labels apply to the VIX, not to the broader markets, which are usually negatively correlated with the VIX.)

Wine pairing: With considerable attention and care, I have now crafted a wine pairing for each VWSI reading and will unveil one every week to match a new VWSI reading. The trouble is that after finishing my list of varietals, I realized that I did not have a pairing for a 0 reading. Fortunately, I have a solution. Since 0 is the most common reading, this is where you should enjoy your everyday red and/or everyday white wine: one that doesn’t break the bank. Because I probably spend too much time with single varietals, I recommend that your everyday wine be a blend, preferably of varietals you do not have the opportunity to enjoy on a regular basis. For a fresh and exciting everyday red blend, I recommend a Rhone blend, specifically the Robert Hall Rhone de Robles. The 2004 was highly acclaimed, but I think the 2005 (44% grenache, 40% syrah, 11% cinsault, and 5% counoise) is even better – and at $10.99 a bottle at Trader Joe’s, it’s a steal. If you prefer a white wine, go with a white Rhone blend. A top selection is Tablas Creek’s Cote de Tablas Blanc, a blend of 42% viognier, 33% roussane, 19% marsanne, and 6% grenache blanc. This is a consistently excellent wine and if you search around, you should be able to find if for $9.99 a bottle. As an aside, both Robert Hall and Tablas Creek are wineries in the up and coming Paso Robles region. If you are looking for excellent California versions of Rhone wines, look to Paso Robles first. Enjoy!

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