FOMC Day Momo Musings

As if we hadn’t already suffered enough lately, today’s event roster includes this month’s FOMC minutes being delivered around 2:00pm Eastern (18:00 GMT) plus ECB board member Peter Praet delivering a speech shortly after. Which means markets across the board will most likely be stuck in nail-biting hibernation mode until then. To keep my rowdy rabble entertained I’ll do a quick and dirty momo update as I’m seeing some interesting developments.

The VIX continues to curl around the double digit mark and I think at this point we have exceeded the late 2006 to early 2007 pre-crisis period which shows a similar range of irrational exuberance complacency. Those were the days! Unfortunately the ultimate resolution was less glorious but we did manage to have a bit of fun, didn’t we? 

Now the VXV:VIX ratio is plotted here against a combo of Bollingers. I usually look for a pop back > the lower 2.0 for long entry opportunities and a drop back < the upper 1.0 for short opportunities. Which is exactly the type of formation that’s currently present.

Before we move on I wanted to point out a little detail that caught my attention on our ‘VIX Easy Rides’ chart. The last one (first green patch from the right) actually brought us another leg down which then was followed by a massive ramp higher. I wonder if that is something worth noting, especially if price does not follow the ROC (bottom panel) lower.

However I also like the see the slightly smoothed signal (SMA(3)) > the mid line which appears to be more reliable. We don’t always get a big correction right afterward but it’s usually a good idea to be out of longs in equities by then. Which we are – check! 

More momo goodness below the fold:

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Happy FOMC Day!