Bill, speaking of VIX rsi, here's a little writeup:
---------------------------
A quick addition to the comments below. for further
reading and interesting ideas on the VIX and SP500,
see " Trading Secrets of the Inner Circle" by
Andrew Goodwin.
walt Downs
CIS Trading
dbtg wrote:
>
> FWIW, the 15-day & 5-day VIX reversal should kick in
> if , IF, the closing VIX today is greater than 30.80 (VIX OHLC so far
> today is 30.80/30.93/29.14/30.00).
> dave
> ---
> The rules from Chapter 2 of "Connors on Advanced Trading Strategies":
>
> ". . . this strategy adds the use of the RSI of the VIX itself to
> provide insight into another way to time your entries more precisely."
>
> Connors VIX Reversal 2 (from chapter 2)
>
> ". . before looking at this strategy, let's look at the underlying
> principles of the VIX Volatility Index).
>
> The VIX is the market consensus estimate of future volatility, based on
> the "at-the-money" quotes of the OEX. It is published by the Chicago
> Board Options Exchange.
> The VIX can be found on all quote systems: end-of-day and intra-day.
> "Common Wall Street wisdom" states that when the VIX is high, the market
> is likely to rise and when the VIX is low, the market is likely to drop.
> As far as I am aware, until my work revealed here, no one could show
> where was the best high/low level to enter, and certainly no one has
> shown it combined with an intraday reversal. This entry uses an even
> more efficient way to measure overbought/oversold levels.
>
> Here are the rules:
>
> 1. Take a 5-period RSI of the closing VIX
>
> 2. When the 5-period RSI gets to 70 or above, it signifies the VIX is
> overbought and the market is oversold
>
> 3. When an RSI reading above 70 is followed by a downtick in RSI, buy
> the market that day on the close.
>
> Short entry:
>
> When the 5-period RSI of the VIX gets to 30 or below, it signifies that
> the VIX is oversold and the market is overbought. When an RSI reading
> below 30 is followed by an uptick in its RSI, sell the market that day
> on the close.
>
> 4. Exit seven trading days later (or use some type of trailing stop
> exit).
> 5. A protective stop helps avoid potentially large drawdowns.
>
> -----Original Message-----
> Date: Sunday, August 16, 1998 1:34 AM
> Subject: re: MKT VIX DATA
>
> >Just a quick refresher for those who posted the question as to how VIX
> >is calculated.
> >
> >Vix is drawn from 8 options. The front month puts and calls bracketing
> >the current cash value of the OEX and the same second month options.
> >The front month is dropped on Monday of expiration week and the "third"
> >and second month then make up the VIX.
> >
> >They are weighed so as to achieve an exactly ATM..exactly 30 day value.
> >
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