Wednesday, February 25, 2009

VXO Collapse May Indicate A Brief Pullback Is Likely

The VXO fell over 15% on Tuesday – a fairly rare occurrence, especially when the S&P 500 is moving off a 50-day low. Below I took a look at how the S&P has performed following such instances:




Notable above is that only 1 of 10 instances saw the S&P rise the next day. Not shown in the chart is that the lone day 1 winner closed lower than the entry on day 3 – meaning there was a short-term pullback in every case. Instances are a bit low in this study but notable and quite suggestive nonetheless.

6 comments:

Roger said...

I like your quantitative analysis. Much appreciate.

Anonymous said...

Rob-

How do these ultra-short studies dovetail with your slightly longer-range strategies like buying SPY when the McClellan Oscillator plunges below -200, and then hold for a sale when it rises back to 0? Do they supplant each other? With the shorter overriding and superceding the longer? Or can they be blended in some way..?

I'm not yet a Subscriber, so I apologize if I have spoken of anything restricted to just formal subscribers...

Daniel

Rob Hanna said...

Thanks Roger.

Daniel,

I try and take eveything into account. Often there are studies that conflict with each other. One tool I developed to assist with this is the Quantifiable Edges Aggregator. See the posts below for an explanantion:

http://quantifiableedges.blogspot.com/2009/01/quantifiable-edges-aggregator.html

http://quantifiableedges.blogspot.com/2008/07/quantifiable-edges-aggregator.html

Rob

Jerry said...

Rob-

I have been a follower not yet a subscriber and find your studies very informative. I do have a question regarding your most recent post "Vxo collapse may indicate a brief pullback is likely" I noticed this was posted today around 7:30 this morning, as a subscriber would I have had this information sooner? say last night or shortly after yesterdays close?
Looking to subscribe just trying to get a feel of the timing of publication of your studies. Thanks and keep up the good work.

Rob Hanna said...

Jerry,

The Subscriber Letter goes out each night before I go to bed. If you're on the East Coast then many times your bedtime will be before mine.

This VXO study went out around 3am. The Bollinger Band study from Tuesday was actually sent out to subscribers during the day on Monday. I typically send out a few intraday updates during the week for subscribers. They often reference or include studies. The Letter normally goes deeper or includes additional studies vs. the blog.

While the blog does often get the research last I make every effort to post while it is still relevant. If I'm up to late, then it does get put off until morning, though.

Rob

Jerry said...

Thank You.