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On Jan 25, 12:17pm, nwinski wrote:
GF> I'm partial to the S&P as a function of VIX chart -- it
GF> shows the ever-increasing trend in volatility as the S&P
GF> price has marched higher.
> But, the period you picked just happens to be the period that is the up period
> in the 18 year cycle of volatility for the stock market.
Norm, I didn't mean to imply that I thought the market should only
go higher if VIX goes higher also, nor the opposite. My statement
was simply a statement of fact regarding events that occurred
over the course of the study.
> For example, I think
> if you start your study in 1987, you will see VIX
> declining steadily, while the market went higher, into 1994.
Actually 12/23/1993 was the low point for VIX at 467.38. That's
roughly 6.5 years after the 10/19/1987 high at 224.84 (SPX).
The specific recent highs and lows are:
Years
10/09/1998 4.79 HIgh
12/23/1993 6.17 Low
10/19/1987 ---- High
10.86
In a separate analysis that follows in a separate message, you'll
see a chart of actual DJIA volatility since 1928 (using yearly data).
> This cycle tells me that VIX should peak in 2006. There is also a
> 11.5 year cycle for volatility which peaked last year. This may cause
> the appearance of the big peak having been last year and then
> followed by a high plateu as this two cycles move toward
> counterbalancing each other.
Maybe. I'm willing to call Oct-1998 as a near term spike top,
although there are plenty of traders/analysts out there calling
for increased volatility and a massive correction, which would
obvious lead to very high volatility. In that scenario, I'd
expect the next spike in volatility to be 2010, and I"d
expect generally declining volatility from here until a bottom
is set in 2004 or so.
> The bottomline is that I am sure that you just happened to pick just
> the right time segment to totally skew your data. You need a study
> that is much lnger in time. If you retest, please let us know how it
> goes and if I was right about this.
I've attached a chart with SPX as a function of VIX from 1986 until
Jan-2000. Yes, it shows that the market advanced as VIX dropped from
1987 levels. And, the market advanced afte the 1993 lows in VIX
as well. The market just goes up - we know that. :)
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