Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

What to Do With an Oversold VIX?


The needle is still pointing north.

Remember all the way back to that Dystopian world we inhabiteed last Thursday? Markets tanking, options screaming. Dogs and cats living together.

And the VIX, ah the VIX. It got considerably overbought, at least via the basic metric of it's 10-Day Simple Moving Average. To refresh, the VIX generally mean reverts, so when it gets stretched 10% in either direction from it's 10-Day SMA, it's considered overbought (oversold) and likely to snap back, while in turn signaling the market itself may be oversold (overbought).

But take a look now:

Not only are we not overbought anymore, we're on the cusp of being oversold. All we need is a move below 24.

I personally don't use these "VIX Rules" as a trading signal, but rather as a window into the intermediate-term market backdrop. The selloff pretty much stopped in its tracks on the overbought VIX, that's a pretty good sign that the needle is still pointed north. If we get officially oversold here, will that halt the rally?

We'll see, but my pre-anticipation guess is that it won't.

Register For Minyanville's Holiday Festivus '09 Here
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos