Monday, January 25, 2010

Monday VIXology

Above is this week's update to our rotation model. Performance metrics are skewed in favor of linear regression values and in this ranking was produced by comparing the 6 week moving linear regression line channel.

Just for comparison sake I've shown the daily bars (above) and weekly bars (below) for a few select ETFs. The big news, hands down, was the 55% pop in the VIX last week, accompanied by a sudden appearance of volume, which helped cascade the majors through the lower LR30 lower bands. For the week: IWM down 4.5%, Qs down 4.8% and SPY down 5%.
This is the first major violation of the weekly LR30 band since the late 08 recovery began and we are now faced with the possibility of a "kiss the channel good-bye" scenario and a variety of yet to be defined support levels.
Previous uber enthusiastic surges in the VIX have exhibited a 3 day span and then displayed a 10-15% pullback and that's that's probably worth a small side bet. Other than that, I'm on the sidelines, busy refining Project Z parameters and deconstructing the PDQ Dashboard to fathom why it exited the long VXX position on Wednesday's close and left a lot of money on the table.

No comments: