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This may be a little more dramatic example of the VIX and the SPX index. It is
an overlay which gives me a better perspective of the relationships. The green
is the S&P index and the white bars are the VIX. This might make believers out
of some. It appears that there is a direct relationship. Good trading, Ira.
Earl Adamy wrote:
> Once again Barron's timing is off on the use of VIX. One of Barron's
> columnists wrote last November that a (then) low VIX reading was forecasting
> a sharp sell-off in the market. (At the same time, may RT traders were
> calling for the same major sell-off). My own historical research had
> revealed that when a major bottom was put in place, a low VIX could be
> associated with a modest correction rather than a major sell-off. I sent the
> attached chart to the columnist together with a suggestion that he do more
> complete research before making such statements. The attached chart (current
> data top two charts, 1998 data bottom two charts)was also published to RT.
> The configuration of the market is now a bit different than it was when the
> original piece was published so low VIX readings must be interpreted a bit
> differently i.e. low VIX readings are likely more critical than they were in
> the post-911 rally.
>
> The fact is, that VIX must be carefully interpreted in light of the major
> price patterns, breadth, and other indicators.
>
> Earl
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