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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Sam who wrote (51363)	3/6/2011 2:56:19 PM
From: Sam	2 Recommendations Respond to of 95411

When Is a Spiking VIX Bullish for the Market? When it's accompanied by a relatively modest decline in the S&P 500 Index by Elizabeth Harrow (eharrow@sir-inc.com) 3/4/2011 2:00 PM schaeffersresearch.com In the most recent installment of Monday Morning Outlook, Schaeffer's Senior Quantitative Analyst Rocky White commented on last week's dramatic spike in the CBOE Market Volatility Index (VIX). After assessing the market's reaction to previous VIX jumps, Rocky concluded that these signals are rather difficult to interpret -- since 2008, they've preceded both drastic declines and modest gains in the S&P 500 Index (SPX). As a result, Rocky delved a little deeper into the indicator this week, at the request of Senior Technical Strategist Ryan Detrick. "My thinking was that the VIX spiked way too much last week relative to the mild SPX pullback," explained Detrick. "In other words, people panicked very quickly on really nothing to worry about." So, Rocky looked back at previous instances since 2000 when the VIX has surged 30% or more over a two-day period and the SPX has shed 2.75% or less during the same time frame (a decline that was determined to be comparatively minor in relation to a VIX spike of that magnitude). After measuring the SPX's return over 5-day, 10-day, 21-day, and 42-day periods following such signals, Rocky found that the market was positive over every time frame. SPX Returns Following Previous VIX Spikes on Mild SPX Decline Of course, a sample size of four instances with only three completed data points is not exactly overwhelming from a statistical standpoint, and this should be kept in mind before we become raging bulls on the basis of this study. Nevertheless, this adds a bit of clarity to Rocky's previous investigation of VIX spikes. "Bottom line," said Detrick, "this has only happened a few times and it is very bullish going out a few months. Coupled with the strong historical returns in March and April during the recent past, you have continued reasons to be long." This study also caught the attention of our founder, Bernie Schaeffer. "This confirms my intuitive beliefs about big VIX pops on modest market moves," he said. "The conclusion seems to support the notion that when investors get jumpy (meaning, the VIX gets jumpy) on the slightest market hiccup, it can be assumed the market has more upside." Bernie continued, "My take is there is such a broad consensus out there that there is a 'low VIX' that indicates complacency, market vulnerability, and so on, that I feel many don't even look at what's right under their noses and see the nervous, jumpy price pops in the VIX on even the most minor market pullbacks. "You can identify this John Q. McNervous VIX action just by eyeballing a 30-minute intraday VIX chart for the past month," Bernie concluded. Senior Vice President of Research Todd Salamone would tend to agree. In recent installments of Monday Morning Outlook, Salamone has rebuffed the argument that the VIX is "too low," citing the previous period of remarkably tame volatility from 2003 - 2007 as support.