Thursday, November 8, 2007

The Week in Fear

Since I’m going to have to give a name to this concoction, I’m going to call it my weekly fearogram. Why not? "Fear plot" sounds a little too Halloween for my taste.

In any event, in the chart below, just like its October 22nd and October 3rd predecessors, I attempt to show how the daily SPX:VIX ratio compares to the median ratio for 18 years of data. Interestingly, the chart shows a surprising amount of fear on Monday, followed by middling sentiment on Tuesday, before an atypical amount of fear kicked in yesterday. Perhaps because the market opened in a relatively benign fashion today compared to some early futures projections, fear is actually below normal for the trading day so far.

In between bouts of intensive trading, I am back-testing this fearogram data and hoping to provide an appropriate interpretive framework soon. My initial hypothesis is that the absence of fear will make it easier for the current pullback to continue.


Anonymous said...

Great Posts as always...

I'm sure you've answered this before, but you graphs are always cut-off on my screen...what do I have to do to view your postings in all their glorious luster?


Bill Luby said...

Hi Adam,

First, my apologies. I do have idiosyncratic charts (it's the way I have my template set up for proportional spacing, rather than fixed width spacing.) My mostly lame defense is that I like it better than providing a link and it seems to affect only a small number of people/monitors.

In any event, the easiest workaround is to right click on the image, highlight "Copy Image Location," and paste the link into a new browser window.

I hope this helps.



James said...

Interesting divergence between the vxn and vix today. This doesnt strike me as bullish

Anonymous said...

Thanks for the worked!


Anonymous said...


Regarding sector rotation.... do you think we are heading out of tech and into something else?



Bill Luby said...


I agree with you. I think those who had their guns trained on the financials, consumer discretionary, REITs, etc. have now decided there is easier and bigger money to be made in tech.

...which leads into anon's sector rotation question. It certainly looks as if the techs are going no better than sideways for the short-term. I think it will take until at least mid-week next week to know if this is a quick pullback or the beginning of a new trend.

FWIW, I'm short tech and staying that way for now.



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