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Tripping Over Skew
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Tripping Over Skew

by The MoleAugust 28, 2017

Apologies for the late post today but I have been on coding duty over the weekend into today, as I wanted to put together a few more weekly statistical charts for you guys. While hacking away I realized that I had actually made a mistake in labeling the weeks, and that means we are currently in week #35 and not #36. Which incidentally makes quite a bit of difference.

SPX.XO_monthly_skew_stats

But before we get to the weekly goods let’s cover a related topic which is SKEW. We covered it here before and this may be obvious to some of you guys. But nevertheless it is something I tripped over today and attempting to ‘fix it’ cost me several hours of utterly wasted time (hence the late post today) and reduced time at the gym (even worse!). Look at the mean monthly skew for the S&P 500 shown above. Does this look accurate to you? It actually is but I’m pretty certain some of you guys are wondering why the S&P has negative skew almost all year.

Skew

And this is why, it all comes down to the definition of SKEW which basically defines ‘positive skew’ as left leaning and negative skew as right leaning. No political jokes or Trump bashing please 😉

SPX.XO_weekly_change_stats

Now let’s look at week #35 which actually has a decent positive mean weekly return since 1957.

SPX.XO_weekly_skew_stats

And the SKEW for this week is -0.5. I actually pulled out all the values for just week #35 and plotted the date range just to make sure. It has a negative skew of -0.5 and understanding how skew is calculated is very helpful when observing the actual histogram:

SPX.XO_week_num_35_histogram_b

Which of course simply plots the correlation between returns and their probability. And here we are of course seeing a concentration of bars in the positive range. Which now makes a lot more sense, doesn’t it? 

Most likely I will however wind up flipping the axis of all the skew charts as to not confuse people (or myself – ahem). Figuring that one out will most likely cost me another patch of hair, but in the end it’ll probably pay off as won’t have the explain the topic every single time.

More juicy stats for this week below the fold:

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About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • johnb

    Mole could you please define skew? Thanks

  • StockTalker

    Something smells

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • BobbyLow

    Yep something smells but I held my nose and bought some Gold this morning. Might be another false alarm but we’ll see. :)

  • johnb

    Thanks, on another note, the 35th week of the year normally does not lead up to labor day weekend or the end of the month, at least in my search here https://www.timeanddate.com/date/weeknumber.html#!week=35&year=2013, and that would make a difference. This year it does lead up to labor day and the end of the month. In my work, I see the last day of the month as normally a down day, and most pre-holidays are up days.

  • ridingwaves

    comex exp. today and it looks GC now ready to break out….Sept. good mos. for SI also….
    Im scaling into energy sector slowly….

  • Grant

    The devastation in Houston may be the last straw that breaks the US gov bond market.

  • StockTalker

    And crude oil

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    broken windows are good for the economy! 😉

    http://www.investopedia.com/ask/answers/08/broken-window-fallacy.asp

  • ridingwaves

    gold move could be blast off….candle now getting embedded in summer 16 support level…

  • Grant

    Ya, on the front end but the amount on emergency cash needed to bail out houston will be astronomical. This will last a long time. The amount of EXTRA debt needed on top of what is already planned may get some people nervous. The cracks will start showing.

  • ridingwaves

    i shorted insurance co this morning….car devastation could actually play out well to push down high inventories at OEM car makers

  • Yoda

    Hi All, back from a long and well-deserved holiday in Europe. Ready to bank some coin. Go Gold!

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Emergency cash is another name for Insurance claims reimbursements.
    The trick now is, are the insurance companies empty shells with no reserves??

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Ronebadger

    Trip report, please

  • Grant

    Well, depends if all those people have flood insurance. If not, it goes to Gov assistance claims, FEMA etc….

  • StockTalker

    Hi ho silver

  • CandleStickEmUpper

    Is that what happened after Katrina and Sandy?

  • http://evilspeculator.com Sir Mole III
  • OzarkHillBilly

    Not much to see so far. My first thought is “consolidation.”

  • Yoda

    Went to see my father who lives in South of France (right next to Spain). Kids joined the trip. It was fantastic. Especially for my two boys who got to enjoy for the first time some real granpa’s time (they are 4 and 5 y old now). Lot of hiking in nature, visit of castles, rivers, wineries, beach, etc, and of course pigging out on some outstanding foods and drinking some top-shelf wines for dirt cheap prices. it was a great break.
    http://www.ph2.net/ph/Bilder/HRP-Bilder/Lac_des_Bouillouses_Panorama.jpg
    http://farm3.static.flickr.com/2374/1880323038_955beb31f5.jpg
    http://www.audecathare.fr/images/gorges/moulin_ribaute/audecathare%20juillet%20056.jpg
    http://jeanmichel.rouand.free.fr/chateaux/p-o/photos/castelnou.jpg
    http://pauletfany.a.p.f.unblog.fr/files/2015/06/jambon-serrano.jpg
    https://s-media-cache-ak0.pinimg.com/736x/a8/1d/61/a81d61624372d5f98cc2c469a96a1e46–mario-sorrenti-anja-rubik.jpg

  • Ronebadger

    Nice!

  • HD

    Noted the ABC hit last Thursday, 18 point rally off that. Another clean 3-3-5 ABC hit today, perfect 10 handles. Would like to see nice gap and crap, sellers come back on a little rally EOM window dressing this week.

  • Grant

    Was there a bond bubble when Katrina hit?

  • ridingwaves

    the disaster will keep the fed from raising rates in sept…gold seems to be smelling that out….

  • Mark Shinnick

    Yeah…a interesting mystery to how this (if real) actually unfolds.

  • HD

    selling rallies has worked all month. Elliot wave or not I plan to keep that game plan until it stops working. September low on deck?

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • StockTalker

    Amen to that

  • Ronebadger

    How long should that “VIX Buy Signal” be good for..theoretically? It’s been a week since it was confirmed with two day inside the upper BB.

  • Mark Shinnick

    Well…for now volatility seems to be falling off the cliff again. Lot of smoke and mirrors …amazing fuckery.

  • HD

    just my $0.02 but the VIX lags so badly. for you guys that have been following it longer than me does the +D against the SPX lows ever mean anything? ie the VIX did not make a HH when the SPX made its LL this month.

  • Mark Shinnick

    I monitor the 2x such as tvix, and viix for a higher-twitch sensitivity. Vol and the index should never viewed as real-time connected as one might imagine.

  • ridingwaves

    went long UWT….

  • HD

    ok, thx. I was thinking you don’t even ever have to look at the VIX. ha.. It’s not going to say anything different than SPX price action and the /VX is a totally different thing.

  • http://evilspeculator.com Sir Mole III

    Usually we are supposed to see a new post signal high within a week and we may push it out to 10 days due to the holidays. But two consecutive signals followed by more downside would be an extremely negative omen.

  • http://evilspeculator.com Sir Mole III

    Good for you – got to enjoy Europe while it still stands 😉

  • Yoda

    It was nice for holidays, but not sure whether I would enjoy living there. The North American way of work suits me better.

  • saltwaterdog

    *NORTH KOREA APPEARS TO HAVE FIRED MISSILE TOWARD JAPAN: NHK

  • http://evilspeculator.com Sir Mole III

    Here we go…. sigh…

  • http://evilspeculator.com Sir Mole III

    Hey guys – how do you like them apples?

    https://uploads.disquscdn.com/images/0b39a470d7c6d0282062af511b6e9dbcd874ba56b18529ff92b34a3777041f59.png

    (inverted y axis – hehe)

  • http://evilspeculator.com Sir Mole III
  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    toward? frakin *OVER* JAPAN!

    gold disappointing.
    http://finviz.com/futures_charts.ashx?t=GC&p=m5

  • ridingwaves

    sweet. love me some skew and potatoes

  • ridingwaves

    this seals the deal, he shoots one more over Japan and they have to shoot it down…we will or they will……gold is going to rocket…..

  • ridingwaves

    The cover pic is hippie hill in GG park, still the same today, different clothes of course….maybe same drummers though…

  • BobbyLow

    At first I thought it might have been from Woodstock but there was no paved walkway on the farm in Bethel, NY. Lot’s of “tripping” going on there too but with some serious entertainment including Jefferson Airplane, Jimi Hendrix, the Grateful Dead, the Who, Janis Joplin and Crosby, Stills, Nash & Young. Can’t believe that was 48 years ago.

  • http://evilspeculator.com Sir Mole III
  • http://evilspeculator.com Sir Mole III

    Gold Gerb has his own park?