I am seeing some signs that the market is likely to pull back in the next few days. On Tuesday the SPX closed just slightly higher while the VIX also rose. This triggered the study below, which I have showed before in the subscriber letter, but never here on the blog.
The reason it only looks at Tuesday, Wednesday, and Thursday is that Monday and Friday VIX prices tend to be affected by weekend time decay in the options market. Instances are a little low but really could not appear more bearish over the next 2 days.
6 comments:
I remember this study, it's a solid one, despite the low sample set. I just wonder if right now, with this strong End Month seasonal strength, and FED-omania, and strong short term momentum, the effect described might be pushed out a couple days, and then match the further out results, say day 4 or 5, with a vengence.
0-0,25 and a requirment for the VIX to close only higher seems a bit specialized. Would it be negative if you loosen up the requirments? It seems so "datamined" otherwise.
Johan,
It is from a larger study that suggested negative implications any mid-week day in which the SPX and VIX both rose and SPX was under the 200ma. I narrowed it to the 0 - 0.25% SPX rise because at one point there was a very small rise in the SPX and I wondered whether the edge would still hold with such a small rise. I was surprised to find that it appeared even stronger.
Rob
Very nice! Thanks for clarifying!
Nice one! :)
Nailed it.
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