| trend | adx | psar | pps | macd | macd trend | sto | sto trend | |
|---|---|---|---|---|---|---|---|---|
| SPY $120.40 | ||||||||
| VIX 19.62 | ||||||||
| TLT $90.60 |
Tom is one of the smartest people I've ever encountered when it comes to practical options trading. When he speaks, I listen hard. Sometimes, though, I disagree.
The VIX is a measure of the volatility of the S&P 500. It's sometimes called the "fear index", because when it rises, that generally suggests lower prices for stocks. One practical effect of a high VIX is that it increases the buy-ask spread for options on SPY, the exchange-traded fund that tracks the S&P 500.
So what's happening to the VIX? On Tuesday, it rose by 29% low to high. A fair gain. However, Wednesday's low was 10% below the Tuesday high. And today's low, so far, is 14% below Tuesday's high.
Today's low puts the VIX at about the level it had reached on April 16, 13 calendar days ago, and below its trading level in late February.
The VIX is trading now at 19.90. In October 2008, the VIX peaked at 96.40! Nearly five times the current figure.
So, yeah, 29% is pretty impressive. And it maybe it shouldn't be exactly ignored.
But I think it's significant only if it's sticky. And today's market seems to me to be one of constant head-fake. Today's surge is retraced by tomorrow's plunge (to use the verbs so beloved by market writers).
If the VIX starts stairstepping up in the next week, then I'll consider Tuesday's spike to be significant. Otherwise, not. In the markets, it's the follow through that counts, not the one-day wonder, however impressive it might be.
SPY, fearlessly, gapped up this morning and is trading 0.8% above yesterday's close. It's within the range of trading that has carried it, for the most part, through the last half of April.
Treasury long-term bonds, TLT, are trading the lower end of yesterday's range. A lower TLT implies higher interest rates on bonds.
Options as a Strategic Investment is a one-stop source of practical information, clearly presented, about the the trader's most important tool for managing risk. This book occupies an important place on my desk.
Abbreviations:
psar - Parabolic Stop and Reverse
adx - Average Directional Index
pps - Person's Proprietary Signal
ma20 - 20-day moving average
macd - Moving Average Convergence-Divergence
mfi - Money Flow Index
sto - Fast Stochastic
About the glance: The colors indicate the state of each signal.
- trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
- adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
- psar, pps, macd: green for bull mode, red for bear
- sto: green for overbought, red for oversold, yellow for the neutral zone.
New to private trading? Here's a look at How to Become a Private Trader.
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