(Click to enlarge)
This is the weekly chart of the VIX (the CBOE Volatility Index) dating back to its inception in 1990. It's interesting to note that the 14-day RSI is as high as it's ever been in the past 17 years. It's currently at 75.24, higher than during the 2 previous credit crunch-type situations in 1997 and 1998, higher than in September 2001, higher than during the summer 0f 2002 when it became clear the war in Iraq was inevitable.
How high did the VIX go on those occasions? 38 in 1997, 45 in 1998, 43 in 2001 and 44 in 2002.
Where are we now? Above 26, as high as we've been since these current "troubles" started.
I think there's a very real chance we revisit those dizzying heights of old. And once there, what's to stop the VIX from making history? Its RSI is already in uncharted territory after all.
No matter what happens, though, and if history is any guide (and if it weren't, there would be no technical analysis), a major buying opportunity will present itself when the RSI turns back down and crosses back below 70.
2 comments:
What this tells me, is I should be a seller of volatility, but hey, that's just me.
Nice blog.
Thanks cucca.
I agree with you...in the long run. Short-term, how much pain are you willing to take, though?
I would refer you to the daily options report and the Vix and more blogs (referenced on the right side of my blog) for more on this very subject. Adam from daily options in particular thinks it's way too early to be selling volatility if I understood him correctly.
Post a Comment