Tuesday, January 25, 2011
THE VIX IS BEGINNING TO MOVE, WATCH OUT
watch out. Its a stealth means of measuring the Variance of prices
for the next 30 days in the S&P500 Chart below. In other words
you would only make a trade on the S&P500 when the VIX is moving
Its calculated by looking at the front month Out Of The Money
Puts and Calls and 2nd month to calculate the Implied Volatility
of the S&P500. It looks at Calls (Up Bets), and Puts (Down Bets)
and Sums the Variance in Prices(Standard Deviation), the result
being the VIX Chart.
Its a strange beast because it does not take direction into account.
Currently the S&P500 is moving up a long time while the VIX
was moving down. Thats because the S&P500 was moving up
in a Sideways manner so the VIX declined. The VIX only moves
down when it detects the absense of Volatility. But now its
beginning to move up from a double bottom from a very low point.
I figure its observing the last gasp of the S&P500 and when it turns
down the VIX will continue to go up because its going to be one big
move down in the S&P500
Watch out for your Pension Funds, all the Cities are broke and
This upcoming event will further underfund the Pension Funds and
its my opinion that this particular decline is of a secular nature,
meaning a trend change of hugh proportions with negative implications
for Mutual Funds in particular.