Thursday, January 15, 2009

Good Chance SPX 821 May Be a Higher Low

It's way to early to know, but the odds are fairly good here for longs

6 comments:

stonebat said...

where's your basis for that, Bill?

VIX/VXV ratio is tilting up... it gave out a sell signal more than 2 weeks ago.

i know OE is tomorrow. something big is gonna happen over this weekend?

Bill Luby said...

Several factors, including:
* Put/call ratios
* TRIN
* VIX
* SPX prior support

I am less bullish than I was earlier, as I think SPX 820 is very vulnerable if there is one more retest.

Cheers,

-Bill

stonebat said...

I wont be based on put/call ratio. The call options could rise because there are more naked call option selling. i.e. more people are expecting that the price ceiling has reached and they can just collect the options premium.

trin... thats really short term. if anyone has traded based on trin only, he would have lost a fortune in Q3/Q4 last year.

VIX... i like VIX:VXV ratio. VIX alone doesnt give a good picture.

SPX support? what support? the ultra thin volumes?

Anonymous said...

I'm missing something...on my Bloomberg I've created a ratio of VIX to VXV. You say your ratio kicked off a SELL signal on December 18th. Yet my ratio is 3.7393 on that day. In fact, my ratio isn't between 0 and 1 since August or early September. And with the VIX going ever higher, how is this ratio ever going to settle down again?

-Jeff

Bill Luby said...

Jeff,

The VIX:VXV ratio spends almost all of its life between 0.9 and 1.1. So far the lifetime extremes for this ratio are about 0.8 and 1.5.

I'm guessing you are either looking at a bad print or perhaps are picking up the wrong underlying with your VXV ticker.

Going forward, if the VIX continues to move up it will probably do so at a faster rate than the VXV, but neither the direction of the VIX nor the relative movements are set in stone (though the VXV does tend to move in a more sluggish manner).

At this moment I have the ratio at 1.006, so it couldn't be much more 'settled down' than it is right now.

Cheers,

-Bill

Eric said...

This is financially driven. I think people are scared to be long or short anything right now, esp going into the long weekend. Inauguration is Tuesday and wouldn't it be nice to announce a big stimulus to go along with that. I agree that this to be a higher low. I think the majority of panic selling washed out in November. We are gonna grind for a while. I would not be getting long the VIX.
And by the way, DOW/S&P have been down for 7 straight sessions, this should be a good signal to trade the long side.

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