Tuesday, February 26, 2013

What Follows Huge 1-Day VIX Spikes


Monday saw some unusually strong action.  One index that showed a real extreme move was the VIX.  It spiked up 34% as fear struck options traders.  In the past I have shown how 1-day spikes of 20% or greater have generally suggested an upside edge.  I’ve rerun that study tonight.  I did also look at moves of greater than 25% and 30%, but that did little to change the odds and just made instances fewer.  So I simply stuck with the old 20% parameter for the study below.



Next day stats suggest a solid upside tendency.  I would also note that the size of both the “Avg Winning” and “Avg Losing” trading is quite large for a 1-day move.  So regardless of whether the market moves higher or lower, we could see some strong action today.

4 comments:

Marty said...

Thank you for this posting Jim. Extremely helpful. And I love the formatting of the data. VERY easy for a market neophyte --like myself-- to read and understand. I really appreciate this.

Anonymous said...

Hi Rob. Great work as usual. Just one more question to your research: Yesterday we saw the second day with >9:1 Volume within 5 trading days.
It would be nice if you could check the stats of that situation, especially for the next couple of days. Thank you for your great work & greets from Germany! -Lukas

Anonymous said...

just an addition: 9:1 DOWN-volume.

Rob Hanna said...

Lukas,

90% days have become much more common since around 2007. Many studies related to them have not been as effective in recent years. I did publish the study you are asking about in June 2010. Below is a link:

http://quantifiableedges.blogspot.com/2010/06/two-90-down-days-in-one-week.html

To deal with the more lopsided breadth readings these days I will often use a "% Rank" calculation for breadth.

http://quantifiableedges.blogspot.com/2011/05/new-tool-for-quantifiable-edges.html

Best,
Rob