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VIX 50-Day MA

 
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PostPosted: Sat Dec 16, 2006 5:00 pm    Post subject: VIX 50-Day MA Reply with quote

A large variety of reliable short-term technical indicators, which worked well for many years, become increasingly or totally unreliable over most of the second half of 2006, particularly above SPX 1,350. Moreover, at this point, it's uncertain if previously reliable intermediate-term technical indicators will also become unreliable.

However, below is a chart of daily SPX (black line and right scale) and the VIX 50-day MA (blue line and left scale). Currently, the VIX 50-day MA is at a historically low level, which suggests an SPX pullback within a short period or at least an increase in volatility, if SPX continues to rally.

There's generally an inverse relationship between SPX and VIX. Nonetheless, there have been periods when SPX rallied, while the VIX 50-day MA moved little. However, given the relatively steep rise of SPX and low level of the VIX 50-day MA, a period of greater volatility should begin within a few weeks.

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