Wednesday, September 5, 2012

Interesting Implications of the RUT/SPX Divergence on Tuesday

Last night in the Quantifiable Edges Subscriber Letter I examined short-term implications of strong 1-day rises in the Russell 2000 (RUT) while the S&P 500 (SPX) declined. I found that there appeared to be a decent upside inclination for the following day. This morning I played around with this concept a little further, added a filter that eliminated instances occurring in conjunction with intermediate-term lows, and ran the test out longer. What I found was quite interesting and can be seen in the stats table below.

While 1-day implications appear bullish, looking out over the next couple of weeks there has been a strong downward tendency. This may be worth keeping in mind over the next 10 days or so.


Martin Niemann said...

How would things look like if you excluded the extra instances for shorter holding periods?

I.e. you use only the 15 instances that you have available for the full 10 days.

Martin Niemann

Johan Lindén said...

Rob, just wondering, will you include this in tonights subscriber letter?

Also, I have a question about the VIX. Many have noted that it has risen a lot while the S&P500 haven't moved significantly.

However, the related VIX etf:s such as the XIV has moved pretty much in line with the S&P500, so it seems that VIX's option's prices may have moved correctly and the VIX index itself is just skewed or manipulated in some manner which I don't understand.


Johan Lindén said...