Now Reading
Upside Down VIX World
64

Upside Down VIX World

by The MoleJanuary 22, 2018

In last week’s ‘Tickling The Dragon’s Tail‘ I mused about the possibility of a VIX Buy Signal on the horizon. Which was followed by a sideways session in the S&P 500 with the VIX actually dropping lower. At the same time the VIX:VXV ratio pulled > its upper second standard deviation and all that means that the fun and games are just about to begin this week. Confused? I don’t blame you but as usual the ole’ Mole’s got you covered:

For starters let’s cover the VIX buy signal for all the noobs – here are the rules:

For a VIX confirmed signal you need 3 events:

  1. A close outside of the 2.0 Bollinger Band (20-day SMA)
  2. A close back inside the 2.0 BB – this issues the signal
  3. A higher close (sell) or lower close (buy) than the close of the day back inside the 2.0 BB – this confirms the signal.

Once you get those three events in succession a major reversal in equities (and the VIX of course) usually occurs within a week. Obviously the buy/sell directions are relative to equities, not the VIX, but of course implicitly a buy signal in equities is a short signal on the VIX side.

Basically at this point we are one step away from a bonafide VIX buy signal. Which makes no sense whatsoever as we haven’t even seen a downside correction preceding the unfolding formation on the VIX. So what the heck is going on?

What IS going on is that 30-day implied volatility has been pumped in relation to quarterly IV as expressed by the VXV. And as you (may) know that means that pertinent ETPs need to keep up as they are constantly adjusted based on a VIX futures ratio as reported by the S&P Short Term Index. By the way there are probably less than 500 people in the world who are following IV as obsessively as I do, so what I’m sharing here is not commonly known even among professional traders.

Anyway, all this brings me to what shall be known as the ‘taking candy from a baby trade’. I can’t do it for free however so if you’re a stingy hold out then here’s your opportunity to finally step it up and cross out one of your New Year’s resolutions – i.e. reward the Mole for all the hard work he’s generously posting here on a daily basis (hint: that means signing up for a Gold sub or better):

evil_separator

It's not too late - learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don't waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Please login or subscribe here to see the remainder of this post.


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 the usual social media waterholes.
Enjoyed this post? Consider a small donation to keep those evil deeds coming!

BTC: 1MwMJifeBU3YziDoLLu8S54Vg4cbnJxvpL
BCH: qqxflhnr0jcfj4nejw75klmpcsfsp68exukcr0a29e
ETH: 0x9D0824b9553346df7EFB6B76DBAd1E2763bE6Ef1
LTC: LUuoD6sDWgbqSgnpo5hceYPnTD9MAvxi6c

  • HD

    VIX wanky!

    Wednesday: existing home sales. Thursday: jobless claims, new home sales and leading indicators. Friday: Q4 GDP (est. 3.0%) and durable goods.

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

    U.S. Gov’t shutdown, the dream is collapsing..

    https://www.youtube.com/watch?v=uEXEsT4G9hs

  • HD

    /BTC got crushed at HWB the C wave. $2500 hit from simple fibonacci.
    So was the rally corrective or impulsive?

  • https://evilspeculator.com Sir Mole III

    Dude, you don’t get it – this is a GOOD thing. We should always just operate with the smallest government possible.

  • https://evilspeculator.com Sir Mole III

    I haven’t had time to look at crypto yet – will report in later.

  • Mark Shinnick

    Begs the question: Who’s dream is government? Maybe NK as a vacation spot?

  • Yoda

    OPEX is over. If we are to see fireworks, those need to get lit this week.

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

    now you’re thinking
    😉

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

    you’re right, I need to keep it in perspective.

    https://i.pinimg.com/originals/a8/bc/7f/a8bc7f65fb9c9925e6a8f2d3241cb8a8.jpg

  • Tomcat
  • ridingwaves

    well I had 1/3 left of JUNO back then…..a nice day for RW….in at 24, celgene bought the rest for 86 today….
    ridingwaves 7 months ago
    a little contango in vix instruments…L UXVY…sold out even…
    took 1/3 JUNO off the table for an R

  • Mark Shinnick

    I guess your breathing a little easier now ?

  • Darrell Osgood

    Yes and no. It would be a good thing if the federal govt actually spent less during shutdown. The fact is, shutdowns cost a lot more money. There is a ton wasted time going through the admin of shutting down and restarting, typically 2-3 days of waste while everyone prepares for the shutdown and another day to restart. Note that the 2-3 days are wasted even if our congresscritters go to the brink then decide to keep the doors open. The work that is not completed due to shutdown is made up for via overtime.
    Then the workers who were sent home get paid anyway. You may cry “that isn’t fair!” and you are right. They want to work, but aren’t allowed to because a few thousand extremely immature people in DC run the show. Those are the people who should not get paid. Of course, they make millions every year taking in semi-legal bribes on the side, so not getting paid is like a small fine to them, but at least it would put the onus where it belongs.
    In short, the shut down does not lead to smaller government. To accomplish that would require adhering to the US Constitution which does not allow for much of the work that they have taken upon themselves.
    And if you are wondering about the term “nonessential”, understand that their definition bears very little resemblance to what you and I would consider essential/nonessential. I could give examples, but this note is already too long.

  • ridingwaves

    sitting here with IBB and XBI from November solidly booking R’s for my little part of the world

  • Mark Shinnick

    Is the equity curve itself normal or has it moved into new range?

  • Mary

    solution – meet half way – shut down but no restart …

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

    I knew it, even 7 months ago.
    😉

    Bully!
    https://evilspeculator.com/volume-holes-2/#comment-3369676731

    EDIT:
    Big Picture? tighten up your stops, ceiling ahead.
    [XBI]
    http://stockcharts.com/h-sc/ui?s=XBI&p=W&yr=3&mn=0&dy=0&id=p23407555684

  • StockTalker

    Are we there yet??:)

  • BobbyLow

    Oil getting bitchy again. Stopped on Short -.7R Loss. Might reenter but sitting on my hands for now.

  • Mark Shinnick
  • StockTalker

    They are everywhere, the banking system is the largest though.

  • https://evilspeculator.com Sir Mole III

    Great information, however in terms of public conscience I think a shutdown is a good thing. We need less government, not more.

    Here in Europe we’ve been going in the exact opposite direction, except where it counts the most, e.g. border security and defense. Otherwise Europeans are drowning in government regulation plus there’s even a 2nd layer courtesy of the f…ing European Union.

  • ridingwaves

    could be new range…I was just in Toronto, hot money is everywhere including cold places….commodity complex seems to be a good place to play this year, maybe even mores so latter half….inflation has been here but now they will finally say it’s here…deflation meme going away

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

    Just a small town girl, XHB – don’t stop believing.

    https://www.youtube.com/watch?v=1k8craCGpgs

    red candles on an uphill trend
    [XHB]
    http://stockcharts.com/h-sc/ui?s=XHB&p=D&yr=0&mn=2&dy=0&id=p71491802632

    ;-D

  • Mark Shinnick

    A reduction of legitimate new economic opportunity normally created with normal cycles – now all bypassed. For them. its China but the problem of looking for investment returns in all the wrong places really is everywhere.

  • BobbyLow

    The Senate just made a deal to reopen. I agree that too much government is not a good thing. But there needs to be a balance between too much and too little. I don’t trust big government but I trust big business less. There also has to be checks and balances within our government.

  • StockTalker

    /NG continues to crack the whip, shorted /YM -2 stop 26200. Smoking crack

  • ridingwaves

    the checks come from taxpayers but the balances are controlled by criminal congress critters….

  • BobbyLow

    LOL and maybe so. But I think you really know what I mean.

  • Julie

    TRXC No 30 min candle closing above 2.06
    JULIE

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

    Every time there is a Govt. shutdown, every elected official in the House and senate should be automatically up for re-election in the next Nov elections. Not just who vote for/against it, all of them!

    That will force them to compromise (whatever it is) and not to go through this charade and waste money.

  • Julie

    Yipes GG Possible double top GG Let’s watch INTC at the upper downtrend line and 61.*% retracement. It went above 45.04 baseline (21) Also TAL I have targets 28 https://uploads.disquscdn.com/images/6fc414e29532100ff46768e78ee2d4822282475714f7e0d58c18d594907e7fd0.png and 24 and could bounce now JULIE

  • ridingwaves

    XLE is pumping iron today

  • https://evilspeculator.com Sir Mole III

    … regarding? Seriously it helps when we know what to expect when we click on a link.

  • ridingwaves

    a good reminder, just moved them up to 92, with half a little lower….
    but it did blow thru last high, bullish trend continues…

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

    that’s a good place to reverse. if not, the RSI is above 50,
    so why ask WHY? don’t fight the trend at that point.
    it’s a crowded trade IMHO.

  • Julie

    GG GDX could reverse here for the lower high I have a 23.57 level. Also 23 .40 is a significant level 2 (.61803) GG Doing great No Cougaritis. I am down slightly BAC short probe very small position. BAC looking for a pullback to approx. 31.08 and will cover
    JULIE

  • Julie

    GG GDX the 21 ema is 23.37 matching the level 2 mentioned above at 23.40. Also the Ichi baseline is 23.35
    JULIE

  • HD
  • ridingwaves

    Some Bio stocks to paper trade over the year…

    NKTR- B/o premium might be 200+pps after JUNO b/o price
    HALO- Could double, have revenue stream already
    FOLD- Approved new drug, more an pipeline
    EXAS- could see 70’s from here…growing at 140%
    PIRS-4 billion in royalties, 100 mil in cash…new drug platform
    VCEL-new skin grafts, profitable late this yea
    GILD- yield, pps appreciation
    spec of spec
    ABIO-60 days from announcing heart trials…
    OSIR-60 days from clearing up financials and going back to big board
    AKAO-new superbug vaccine, should hear something soon on trials..
    AEZS- Just approved, shorts slowly leaking out, bullish
    OMER- Spec platform of drugs, analysts bullish
    ACAD-Baker brothers darling

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

    I would like it to reverse up,
    http://stockcharts.com/h-sc/ui?s=GDX&p=D&yr=1&mn=2&dy=0&id=p41562516893

    but weekly copper is not supporting that fantasy.

  • Julie

    RW The Baker Bros. I have mentioned them previously
    JULIE

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

    crap.
    I was stopped out Thursday.

  • Mark Shinnick
  • HD

    /BTC is leveraged 5 coins so a $500 move pays $2500 per. You can see the opportunities.

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

    after watching bitcoin, learning about it, I actually feel safe in spec bio…..that is an oxymoron for sure

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

    after watching spec bio – I feel safe in Natural Gas.
    😉

  • HD

    Ha. Touché! Looks like a Pretcher style “count”. Not best practice imo.

  • Julie

    GG I have a target DO at 20 Also checkout FANG and DO weekly charts. Not a waver But ….. !
    JULIE

  • HD

    It’s volatile which from my POV actually makes it more predictive.

  • ridingwaves

    yeah, they have taken some losers too, shows know matter what you know, the inevitable will happen….
    I wonder if Ackman is kicking himself over VRX liquidation of position now and pretty much daily over last 2 mos

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

    DO is just following USO. {yawn}

  • Julie

    RW IMO EXAS is going down to it’s weekly 55 ema approx. 40 then a nice buy Just saying RW
    JULIE

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

    ok, just let me know when B begins.

    I need to make some money.
    😉

  • HD

    Ha…I was pounding the table at 16,500.

  • Tomcat

    Good point, I assumed was understood based on recent posts that the main subject is Bitcoin.

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

    Time Check.

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

    Yes, it is volatile but to some extent it’s also more predictable in that there are a large amount of amateurs trading it.

  • HD

    good point. I’m due for a pull back. 😉

  • Mark Shinnick

    Its all too weird to think about because I have no friggin idea why anyone would ignore a simple robust trendline without at least a decent hedge. Maybe he had one no one bother’s to mention, but I never cared figuring he’s a big boy.

  • HD

    $RTN has doubled since the election. Interpret how you see fit.