Tuesday, December 23, 2003
How low can it go? Lower still!
I finally got with the program and redid the SPX price relative to VIX chart using the "new" VIX, VXN. Much hand wringing regarding VXN being so low. This chart puts "low" in perspective.
You can see that SPX/VXN has entered 'new' territory. As long as Price-Rel-VXN holds above the MA, the bull remains in charge. A divergence may signal a reversal.
This SPX/VXN study came about because VXN wasn't on its own consistent enough to follow the VXN is low, time to go; VXN is high, time to buy' thing. I noticed a few things:
(1)The ratio SPX price relative to VXN channels (lower pane)
(2)Significant channel shifts happen when price is trending up or down
(3)SPX/VXN reversals are good swing indicators, regardless of channel position
(4)'Significant' tops & bottoms are accompanied by channel shifts.
(5)The direction of the 34d, 60d MA (Bollinger Band basis) needs to shift as well to make the SPX/VXN reversals significant.
At last, over the rim
of the waiting earth
the moon lifted with
till it swung clear of the horizon and rode off,
free of moorings
- Kenneth Grahame,
The Wind in the Willows