Monday VIXology

Here's a little variation of the VXX Dashboard that I've been fooling with that involves pairing the VXX with a basket of currencies. While the model doesn't produce those 90% + linearity returns seen in some of the other PDQs the P&L is certainty impressive given that this model reflects only the last 6 months and that these are currencies.
Of particular note is the green status of the P&L status for each and every one of the pairs. I'll be tracking this little nugget in the background for the near term as the returns so far have been very impressive.

We did get a mean reversion move last week as the Qs worked off oversold levels and the VIX settled back to the LR30 upper channel band. With most of the volatility surprises prompted by earnings reports now in the past the technicals are strongly suggesting a continuation of last week's bump.

And, just to put things in perspective I've included a comparison of the VIX and VXX below. Peaks and valleys coincide but notice the LR30 down slope of the VXX indicative of a net decline of volatility in the VXX relative to the VIX.

Finally, a little side note here on the NYAD proxy gadget added to the blog on Friday. I neglected to mention that I set the gadget to display at 2x the amplitude of the NYAD in order to provide clearer indications of impending trend changes. There are two smoothing algorithms on top of the underlying detrend indicator and a doubling of the initial raw signal value to accomplish this goal. Keep in mind this chart does not necessarily reflect prices, but rather the momentum of the NYSE. With this template in place I can now create a NYAD-like signal for virtually any index and I'll add one for the Qs and the IWM in the future, just to test their forecasting value.