Monday, July 2, 2007

More Volatility, Yet VWSI Holds Firm at Zero

For the second week in a row, we have seen a significant uptick in volatility, yet the VWSI refuses to move from zero.

The VIX ended last week at 16.23, up 0.48 or 3.0% for the week to its highest weekly close in 3 ½ months. Looking back two weeks, the VIX has now risen a cumulative 2.29 points or 16.4%, with the VWSI holding steady at zero at the end of each week.

For what it’s worth, the VIX futures appear to agree with the assessment of the VWSI, as futures from July ’07 to June ’08 are all bunched tightly in the 16.16 to 16.41 range.

(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: For an inexpensive Rhone blend, I continue to recommend: Oakley Five Reds; Robert Hall’s Rhone de Robles and Tablas Creek’s Cote de Tablas Blanc; Wrongo Dongo, the contrarian favorite from Spain; and The Stump Jump (I prefer the white over the red) from Australia. If you are looking for additional ideas, I encourage you check out the Rhone Rangers.


dk said...

Good to see you back in the saddle.

It's interesting that VWSI appears to be filtering out some of the ST volatility noise while confirming the wisdom of VIX futures. During the late Feb VIX spike I remember you pointing out a similar nonchalance in the longer VIX time horizons.

Overall, the higher volatility has not caused lasting stock market stress. I continue to be reminded of poorolditalian's observation that all meaningful tops are accompanied by huge volatility. Both stocks and the VIX have a ways to go, but a pro-volatility stock market is a noteworthy development.

Bill Luby said...

Thanks, dk. I am a little rusty, so no taunting if I fall off a time or two.

I definitely need to do the next couple of VIX and SPX correlation research pieces, as this stuff is getting more interesting each week.

I am not totally on board with POI, though the popular definitions of "toppy" markets seemingly always include increased volatility.

I'd love to be able to take that VIX and SPX monthly chart currently atop this blog and take it back a few more decades. Maybe I will just take the largest one day percentage drops as a proxy for high volatility and see how the markets fared thereafter. Something to continue to ponder, anyway...

DISCLAIMER: "VIX®" is a trademark of Chicago Board Options Exchange, Incorporated. Chicago Board Options Exchange, Incorporated is not affiliated with this website or this website's owner's or operators. CBOE assumes no responsibility for the accuracy or completeness or any other aspect of any content posted on this website by its operator or any third party. All content on this site is provided for informational and entertainment purposes only and is not intended as advice to buy or sell any securities. Stocks are difficult to trade; options are even harder. When it comes to VIX derivatives, don't fall into the trap of thinking that just because you can ride a horse, you can ride an alligator. Please do your own homework and accept full responsibility for any investment decisions you make. No content on this site can be used for commercial purposes without the prior written permission of the author. Copyright © 2007-2023 Bill Luby. All rights reserved.
Web Analytics