actio-et-reactio
Balance is but a brief transition between extremes.
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Friday, June 06, 2003
SPX Price relative to VIX
This SPX/VIX study came about because VIX wasn't on its own consistent enough to follow the 'VIX is low, time to go; VIX is high, time to buy' thing. I noticed a few things:
- SPX/VIX channels
- Significant channel shifts happen when price is trending up or down
- SPX/VIX reversals are good swing indicators, regardless od channel position
- 'Significant' tops & bottoms are accompanied by channel shifts.
- The direction of the 34d, 60d MA (Bollinger Band basis) needs to shift as well to make the SPX/VIX reversals significant
As to now (6/6/2003), SPX/VIX finally got out of the gutter channel and into the center turn lane. It hit the upper channel line & is reversing, perhaps a bit like Oct02 with the perhaps significant difference that the 34d MA is turning up and price tested and moved back up off the 60d MA.
I'd look for a strong move out of the center lane to confirm more up. Otherwise, it may repeat the Apr-Dec98 center channeling, which could bode well for a trading range.
If this pull back drags it back in the gutter channel, well, bummer! just another bear rally.
Labels: sentiment
At last, over the rim
of the waiting earth
the moon lifted with
slow majesty
till it swung clear of the horizon and rode off,
free of moorings
- Kenneth Grahame,
The Wind in the Willows
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