Friday, May 25, 2012

Spikes in ratio of VXZ to VXX seem to predict VXX moves

Here's a strange and maybe interesting pattern in the ratio of VXZ to VXX. Spike tops and bottoms seem to predict rallies and drops in VXX.  The thing about VXX is that drops tend to be gradual, and rallies very abrupt - it is based on the index of fear, after all, so it goes up fast and is dispelled over time when people realize that the sky is not falling.

If this holds, the next spike top in the ratio should provide a buying signal for VXX. Reversals have come every 10-15 days lately, so maybe it could happen sometimes next week.


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