Bandit - what's your thesis? Particular since you're looking at VVIX vs VIX?

    It's a potential change in

    Posted by timebandit on 1st of Aug 2022 at 05:18 pm

    It's a potential change in character. 

    $VVIX has been trending down since late January, or about three weeks or so after the beginning of this bear market. Take a look at the snapshot of the weekly chart. And if you look all the way to the left of that chart, you'll see that $VVIX did something similar during the early stages of that bear market starting in October 2007 through April 2008.

    This will be easier to see on daily charts. First, we can look at the current daily chart of $VVIX, where you see that it began trending down in late January. It continued downtrending when the market bottomed in early June and $SPX rallied 500 points. It has been doing that for 29  trading days since $SPX bottomed. Today, $VVIX was up 7.5% while $SPX declined 0.28%. And it was moving up all day, even when $SPX climbed to 4144 after the gap down. 

    So something seems to be going on. I'm wondering if i$VVIX has made a bottom. We won't know that for a while, but it's possible. 

    Anyway, now let's look at how $VVIX behaved in the first months of the last bear market in 2007-08. It started downtrending in about three weeks into the bear market (the end of October 2007), just like it did in January this year. Even after the market bottomed in mid-March 2008 and began a strong rally $VVIX continued to downtrend. It did this for 25 trading days before making a bottom on April 23rd (see vertical dashed red line).  Then as you can see in the shaded blue area, $VVIX and $SPX both trended up together for 18 more trading days, before $SPX finally topped and the market entered a steep decline.

    So my thesis is that this may be where we are now, provided $VVIX has indeed bottomed and begins trending up. This isn't any different than what Matt and Steve have been projecting for us, where we still have a potential target overhead and that it will take some time before the ensuing decline. I just find the parallel in the behavior of $VVIX interesting.

    $VVIX Weekly Chart

    $VVIX Current Daily Chart

    $VVIX 2007-08 Daily Chart

    In this post two weeks

    Posted by timebandit on 17th of Aug 2022 at 10:33 pm

    In this post two weeks ago I noted that $VVIX moved up all day while $SPX was up. I wondered if it had bottomed after trending down since late January. I also compared its behavior the last 7 or 8 months to what it did the first several months of the 2007-08 bear. I also talked about how $VVIX behaved in 2007-08 after bottoming (see blue shaded area).

    $VVIX Current Daily Chart

    $VVIX 2007-08 Daily Chart

    Well, as you can see it did bottom the day I made that post (see vertical dotted red line) . And the move it has made since then is very similar to the move it made after bottoming in 2007-08. It moved up, made a higher low, then went up to the upper band (20,1.5), and pulled back. It appears to be making a second higher low, but that is not confirmed yet. In 2008, after making that second higher low (see vertical dotted blue line), it moved up for another 4 days in tandem with $SPX, which began its decline to new lows on the 5th day while $VVIX continued higher.

    In 2007-08, $VVIX took 12 days to get to the upper band. It took 10 days this time. There is also some similarity in the way it became uncorrelated then and now. So we shall see. There is no guarantee about anything moving forward from today. But it has been interesting to see the fractal play out so far.

    Thanks for the posts bandit 

    Posted by steve on 18th of Aug 2022 at 08:47 am

    Thanks for the posts bandit 

    Bandit - thanks, appreciate the

    Posted by DigiNomad on 1st of Aug 2022 at 11:11 pm

    Bandit - thanks, appreciate the detail!

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