Thursday, November 01, 2007

VIX Jumps and Other Topics for a Bearish Thursday

* Jump in the VIX - We leaped over 25% in the VIX to 23.21, a 20-day high in option volatility. Going back to 2004 (N = 961 trading days), we've had 73 occasions in which the VIX has hit a 20-day high. Two days later, the S&P 500 Index (SPY) has averaged a gain of .33% (43 up, 29 down), quite a bit stronger than the average gain of .05% (480 up, 408 down) for the remainder of the sample. I show only 9 trading sessions since 2004 in which the VIX has risen more than 20% in a single day. SPY was higher on 7 of those 9 occasions two days later. That doesn't guarantee a turnaround in the market, but it certainly suggests that selling into such weakness has not provided traders with an edge overall. Here's another VIX elevation pattern and here's a look at VIX and put/call ratios. Here's a post with more data on volatile VIX patterns.

* Twitter - I've had some very positive email comments re: the latest Twitter postings, including the statistical pattern I posted in the AM and the indicator updates. The latest five Twitter "tweets" appear on the blog home page; the full set are on my Twitter page.

* Tricks of the Mind - Thanks to an astute reader for pointing out this interesting article on how normal brain functions make us see patterns that aren't really there.

* Cognitive Fitness - Thought provoking views from Harvard Business Review and more, compiled by Sharp Brains.

* Chart Reading - Here's a compilation of chart-related posts from Trader Mike. Note that Mike posts trade idea candidates daily. A couple of interesting books on charting have come out lately. One I'm reading currently is from Suri Duddella; nice overview reference of various patterns, with examples.

* Odds of Recession Down? - That and more fine link perspectives from Abnormal Returns.

* Inflation on the Rise - Excellent views on what the numbers are saying from The Big Picture.

* Sector Blogs - I like to point out resources that are unique. Here's the blogroll from InvesLogic, with specialty themes of interest to some traders and investors.

* The Future of Housing - What are the CME housing futures saying about housing prices for the remainder of the decade? Here's a view from Seeking Alpha and Bespoke Investment Group.