Tuesday 9 October 2012

Volatility battles higher

With the indexes closing around 1% lower, the VIX managed to battle its way higher across the day, closing +8.3% to 16.37. This remains a very low VIX, and there is a considerable journey ahead just to hit the big 20.


VIX'60min



VIX'daily



VIX'weekly


Summary

A day when the VIX never really showed any major moves, it was more of a gradual stair step higher.


Upside targets

The first target is take out the recent high of 17, that will open up 18/19, which seems very viable sometime before this week wraps up.

The huge VIX weekly cycle is now positive on the MACD (blue bar histogram) cycle, and there is plenty of easy upside to the upper bollinger of 22/23. 


The big issue for this Autumn - will the VIX explode?

At the June low, when the SP' floored at 1266, the VIX was only in the 27s. That was pretty surprising at the time, and in retrospect, it looks even more bizarre. I had expected at least the mid 30s. I suppose it was a tell that the underlying market was poised for a major ramp into the summer. The power of hindsight huh?

So, VIX 27+ this Autumn ? I certainly think that level is viable, but even VIX'27 is not exactly that exciting. What about VIX 30/40s ?

I think its going to be the case that the market will need to be seriously freaked out over something major. Natural 'market down cycles' are just not going to do very much to the VIX, other than a brief move into the 20s.

Scary things ahead?

US rating downgrade.
Congress unable to agree on delaying the fiscal cliff, with GDP falling 3-5% in Q1 2013
A Eurozone member exiting
Middle Eastern conflict, sending Oil to the moon...beyond the 2008 spike high of $147.
--

I'm seeking to exit current short positions on any VIX spike in the 18/20 range, with SP'1420/00.

I find it very implausible that we can break <1400 for at least a few more weeks.

More later