Friday, October 14, 2011

The Incredible Shrinking VXO

The VXO has dropped very strongly over the last week and a half. On Thursday for the 2nd day in a row it closed more than 20% below its 10ma. Looking back to 1986 I was only able to find 3 other instances where this occurred. While it’s dangerous to draw solid conclusions from just 3 instances I decided to show them below:



It hasn’t happened in about 21 years, which makes the setup even more questionable, but the run-up / drawdown stats were so lopsided I thought it was worth pointing out. Over the next 2 days the instances all saw a drawdown between 2.1% - 3.8%. Only 1 instance saw any run-up, and it was just 1.6%. (We’ll be testing that at the open.)

2 comments:

Oliver said...

Rob,

great blog, very informative.

I noticed this week for the SPX500, we had a big % move higher, yet volume was tepid, well below recent averages. Wondering if you have ever look at what happenings the following week, i.e. is the move reversed?

Regards

Ollie.

Oliver said...

"Wondering if you have ever looked at what happens the following week"

note to self, check grammar before posting.