Friday, June 8, 2007

Short-Term VIX Forecast

Based on historical precedent, I am forecasting that the VIX will snap back about 9% in the next three trading days and 12% over the course of the next five trading days. This gives me the following end of day price targets for the VIX:
Tuesday, June 12th: 15.52
Thursday, June 14th: 15.01

It will be interesting to see how closely the current VIX spike tracks with historical standards.


Agustin said...

Bill: Great stuff, very useful.

Bill Luby said...

Thanks, Agustin. As I type this, the VIX is down to 15.52 already -- two days ahead of schedule.

Bill Luby said...

Bingo. We just it 15.01 -- a full four days ahead of schedule.

Robert said...


Does this suggest that the a few more "aftershocks" are possible if the VIX reverted so quickly?

Rates fell, the VIX fell, everything seems like it is bull market business as usual again. What is your take?

Bill Luby said...

I like your thesis, Robert, but I don't have any pre-cooked analysis that can support or challenge what you say -- and it will probably turn out to be difficult to properly test.

That being said, my off the cuff thinking is that with each subsequent large shock (something like a VIX +20% in one day), I suspect investors are less likely to conclude that the volatility shock is behind them. It is one thing for the bulls to feel like they just dodged the bullet, it's quite another to not know how many bullets are still left.

I'll post on this if I can come up with any better information and/or ideas.

Anonymous said...

Hi Bill ,

Love the website. I have watched big next day reversals since 2005 after large 2-3 day sell offs and have found that if there is a very large reversal it tends to also get reversed and the lows re tested if not broken. To me this is like what the other poster said. people throw caution to the wind and chase price which has lead toweakness in the near term. Obviously thats not a large testing period but seems consistent in the last handful off sell offs.

Trading Goddess said...

Piss off to the guy above me. Yes, I have my reasons - see comments.

Anyway, my dear Bill...

You learn something new every day...

Today is was this:


Hope you are enjoying your weekend! See you at the plant on Monday!

Anonymous said...

Sow nothing, reap nothing.

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