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Strategies & Market Trends : Investor sentiment surveys - a technical indicator
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To: Q. who wrote (133)1/9/1999 6:26:00 PM
From: dospesos  Read Replies (1) of 167
 
JohnG:

PCYHuang explained the CBOE's VIX quite well. I got tired of standing on my head (as with the TRIN),and on my quote and chart software I programmed it upside down (or right side up, I think.;-) as 100/VIX. Although I have only followed it for the last 18 months, I find it very useful, especially at tops.

Most of the time "INVIX" (as I all it) tracks the SPX or OEX quite nicely: it makes lows when price does, and highs when price does. Usually. When it doesn't, it seems to signal a change of trend coming. It is not of course a precise timing tool. One example was that "INVIX" topped in late March 1998 about two weeks before the SPX went into the April-June trading range.

Currently "INVIX" has topped out on 23 December and has made successively lower tops on 29 Dec, 6 Jan, and 8 Jan.

Since VIX and "INVIX" measure implied volatility, my assumption is(and I am NOT an options trader and hence may not be using the correct terms) that there is a perception that volatility will increase. This sounds almost silly, but I think the perception of increased volatility in a trend implies that options sellers feel the trend is in danger. They are marking up premium.

In any event I would welcome your or other posters' comments on any of this. If the market just goes on up despite my "brilliant discovery", I guess we can just forget about it...:)

BTW, "INVIX"/price divergences can also be very useful intra-day along with other daytrading indicators.
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