VIX - starting point

[ayla]

I'm uploading this single chart (without a data sheet) with the VIX and SMA averages along with I fund. I think this chart shows in a glance how significant the VIX is. Data will follow once I figure out how to streamline it a bit.

Apologies that it is in PDF format. I couldn't get the clarity it needs within the constraints of TSP Talk file upload size requirements.

I'll work on this. I'm sure there must be a way but for now, I think you will find it worth the time it takes for Acrobat reader to load on your computer when you click on the attachment.

More to follow.

(Also, apologies to those who have downloaded this from another thread here on TSP talk - I've shown this before but I think it is so pertinent here that it is worth repeating.)

 

[ayla]

First thing I must warn is that you shouldn't believe everything you read on this forum without checking (at least you shouldn't believe what I say LOL.)

Because I wanted to repost the chart showing Fund results if following VIX strategy, I redid the data and turns out I made an error in the Fund prices.

I'm uploading a new chart that shows that my VIX strategy taken alone without any other strategy doesn't do better than if you would have held the I Fund for the entire year. (I've only included I fund because of size restrictions on the attachment.)

In the data sheet attached, it shows I fund results since January at 21.6% (see bottom row) if you would have held the Ifund long except for those periods when the VIX went above it's 200 day average. I fund results holding long since January without any break, at least according to tspmoney's website at http://www.tspmoney.com/prev/index(2).php shows 23.8%

But I think the point is still well taken about the VIX, if you look at the chart. The VIX is VERY important if you want to avoid following the market DOWN and then back up no matter what (and if you accompany this strategy with a better strategy to use the rest of the time rather than just holding long.)

Guess that is what this forum is for, evaluating whether an indicator is worth using or not. Your choice. But for example today, because of the chart, I have a pretty good idea that the major pullback everyone is expecting will not happen tomorrow because of the lower right hand corner, too far down below the 200 day VIX for right now IMO.

Also, still need to evaluate this for a longer time period.

 

[tsptalk]

Nice work ayla. Do you need a specific file type size to be increased?

Tom

 

[SkiUtah]

Any chance of getting a charts section created on TSP talk? I am a bit "market technically challenged" and would benefit greatly from looking at charts as they come out, be it daily, weekly, monthly, and a consolidated area would make it quicker and easier to do the reasearch.

Thanks for the VIX info, it has taken me to another level of understanding.

 

[tsptalk]

erichschutte -
Did you mean here on the message board, or another section of the site?

 

[SkiUtah]

Wherever it makes most sense to post charts... I am too new to know. I see the TA TOOLS thread has just started, and perhaps a subthread there with the charts would be a logical consolidation point. JMHO

 

[ayla]

In case anyone is still following...

With the 2006 chart I posted earlier, I commented that I had added a one day delay to make the results more realistic.

(specifically: See the "if" statement for the "%results" that test whether VIX price is less than 200 day average. The "if" statement tests elements from the previous day.) This delay was intended to correspond (somewhat) to the delay we have to endure for the IFT transfer to take effect.

Looks like this one little day makes a huge difference. Unfortunately, I still see it as needing to be included.

Bottom line - I can only conclude that the VIX 200 crossover is a helpful trend in predicting pullbacks. I need to get my data in better shape if I ever try to make further predictions, will be working on that...

FYI - VIX is up today by over 11% - That's a LOT.

 

[dell]

Is the fact the VIX is up 11% positive or cautionary? (Still trying to figure things out).

Thanks - Dell

 

[ayla]

From what I can tell, a VIX peak may or may not mean trouble is ahead. How do you like that for being 'wishy washy"? it seems to be often followed by a drop in the TSP funds - though not always.

But I think the main thing is that the 20 day VIX average is usually above the 50 day VIX average before any downturn occurs, that seems to be the usual pattern from what I can tell.

I think I will "go out on a limb" and predict that this time around, any downturn will not be very serious. I would guess it will be a 50 cent drop (not "percent") or something like that in the I fund probably (translated to the other funds as well), something like that anyway.

Reason I say that is because it looks like there are minor VIX peaks between every major VIX peak. We had a major VIX peak in June and seems to me like the next VIX peak event should be "minor" if it follows a pattern of other VIX peaks and valleys this year. (Big "IF"). That means any drop in the market immediately following the "minor peak" will likely be fairly minor.

Still looking ..

I'll upload some data tomorrow. Gotta check it thoroughly first...

 

[SkiUtah]

Thank you. Seems your VIX data is in concert with the "rolling corrections" Birchtree has discussed. Santa rally intact, softlanding talk again, dollar falling, FOMC next week, oil is getting squirrely... life is good.

 

[ayla]

Very interesting last couple of days. The VIX is definitely forming some sort of "peak". Can't guarantee that it isn't ominous but I'm thinking it is going to be a 'minor" peak like what formed on January 20, 2006. That would mean any pullback is going to be relatively minor.

When/if the VIX crosses above the 200 day average, I'm pretty sure at that point that I will be moving my funds to the "parking lot" (i.e. the G Fund probably) until signs that the "peak" is over. What those signs are, I'm still trying to learn.

The 20 day average (SMA) is still not above the 50 day average. That has been known to be an important milestone before the VIX data really reflects that the market may be in trouble.

I hate to keep reminding people of how new I am at this but in case anyone new to the forum is reading this, I want them to know that I'm rather inexperienced with predicting market action (and my returns this year aren't that great but I didn't know this stuff until only recently. oh well.) And I have had some difficulty pulling this data out of all the other data I have. I'm still learning Excel as well...

but that said, this data chart IS VERY interesting - it will be obvious to you just from glancing that something is going on - in particular, look at the spikes forming in the bottom right hand corner.

 

[fedgolfer]

just posted this in Fab's talk thread with a little more text there, from decisionpoint.com:

"Raw VIX numbers are of limited value. The VIX indicator is most useful when used in combination with some type of overlay, and preferably one that employs channels or bands. Some technicians use Bollinger Bands for this purpose, others use a short term (3 months or so) linear regression channel or percent bands. When used in this fashion, it is the VIX position within the channel that's important, rather than the raw number reading."

 

[ayla]

just posted this in Fab's talk thread with a little more text there, from decisionpoint.com:

"Raw VIX numbers are of limited value.

I think the chart I've just posted is very enlightening but I do agree that without the 20, 50 and 200 day VIX SMA averages, one couldn't really tell alot. Perhaps that is what they mean.

Because the VIX peaks as shown on the chart correspond to PRECISELY almost to the day, downturns, at least with the past couple of years data. I haven't seen precision like that with any indicator I've looked at so far.

I may be getting a little arrogant but I think I will have to say that just because one claims to be an analyst, that doesn't mean they should be believed (that includes me also of course, LOL). The chart speaks for itself IMO.

But if the reference to "limited value" applies to "day trading", then I totally agree. The VIX trend seems to be good for a week or so and during that week, there can be some downturn and you don't really know it until the next day (which is probably what my TSP balance is probably going to reflect this week. I think I should have sold on Friday.)

I just wish I would have known the "next day" back in May when the VIX started its assault to the peak. I still would have had losses but they would have been significantly less.

 

[fedgolfer]

... i didn't mean to discount anything you've added. I agree w/ your crossover anlysis. I just thought I'd add that verbage to this thread so other people can see another way to use VIX with bollingers or price channels when swing trading. That's all.

 

[Fivetears]

ayla, two Q's regarding your chart VIX2006.xls:
1. Is there a reason why the column F (Volume) values are inconsistantly entered?
2. Is there a reason why the "Date' data fields in columns A & M do not match up beginning on row 201 and ending on row 724?

I really want to learn and understand.
Thanks.

Very interesting last couple of days. The VIX is definitely forming some sort of "peak". Can't guarantee that it isn't ominous but I'm thinking it is going to be a 'minor" peak like what formed on January 20, 2006. That would mean any pullback is going to be relatively minor.

When/if the VIX crosses above the 200 day average, I'm pretty sure at that point that I will be moving my funds to the "parking lot" (i.e. the G Fund probably) until signs that the "peak" is over. What those signs are, I'm still trying to learn.

The 20 day average (SMA) is still not above the 50 day average. That has been known to be an important milestone before the VIX data really reflects that the market may be in trouble.

I hate to keep reminding people of how new I am at this but in case anyone new to the forum is reading this, I want them to know that I'm rather inexperienced with predicting market action (and my returns this year aren't that great but I didn't know this stuff until only recently. oh well.) And I have had some difficulty pulling this data out of all the other data I have. I'm still learning Excel as well...

but that said, this data chart IS VERY interesting - it will be obvious to you just from glancing that something is going on - in particular, look at the spikes forming in the bottom right hand corner.

 

[ayla]

ayla, two Q's regarding your chart VIX2006.xls:
1. Is there a reason why the column F (Volume) values are inconsistantly entered?
2. Is there a reason why the "Date' data fields in columns A & M do not match up beginning on row 201 and ending on row 724?

I really want to learn and understand.
Thanks.

I have rechecked the data and it still looks good to me though I totally understand why you are asking the questions. I should have explained this initially.

1. - Column F is an exact replica of what I downloaded from Yahoo for ^VIX. I can't answer why they are inconsistent. I remember having the same question myself. But I left it in because if you want to update the data, it is a simple cut and past from: http://finance.yahoo.com/q/hp?s=^VIX

2. Reasons columns A & M don't line up:

Columns A thru L is actually a different database (i.e. Yahoo) than columns M, R, S, T, and U. Getting these matched up using the common variable of "date" is the reason Column M and Column A aren't lined up. Since Number of dates in TSP datebase is less than number of dates in YAHOO VIX database.

It might have been clearer for you to see this if I would have just provided two data sheets instead of putting the data side by side. I may do that in future uploads.

Note column Q is labeled "VIX - date Matched", not just 'VIX" because it has been extracted from column G only when the date in column M for the same row is found in Column A.

More details:
Col A in VIX data downloaded from YAHOO includes extra dates not included in the TSP date column M. This mismatch causes some extra effort to be made (which I should have explained). Data posted in columns N,O,P and Q are extracted from columns G, I J and K after successful match in the YAHOO date column. The value is extracted (using an Excel "index" formula) and posted.

For example, the first date in Column M (M201) which is Nov 5, 2004 has a value for the VIX that is extracted from the value in Column E (E 205). Can't just pull out the VIX value from the same row since VIX dates don't necessarily line up with TSP dates not just because of my sloppiness but the databases of dates are not the same.
I could have been less sloppy and at least started the dates out correctly side by side but Column M will always eventually "fall behind" column A in this example because there are holidays that cause dates to be excluded from the TSP date database that ARE included in the YAHOO VIX date database.
Bottom line is that the chart is ONLY made using entries from Column M thru U. As long as this data and the corresponding date is correct, that is the most important.
BUT.. the reason the other data is there is that the data in Columns A thru N is the raw data from Yahoo that is needed to eventually end up in Columns N thru Q.
Columns M, R, S, T and U are extracted from the TSP share price chart (and sorted in ascending mode) from: http://www.tsp.gov/rates/share-prices.html

I did some spot checking in case I made some errors (like I have definitely made before) and it looks good. I picked a date from column N, and looked at it from the TSP share database and compared it to the IFUND in column U and they matched. I also made sure the VIX number in column Q for a TSP date (in column M) matches a VIX number in column G for the identical VIX date (in column A).

Probably clear as mud. Sorry, I've answered this by repeating a lot. I may try to create two data sheets as explained above but in the meantime, only look at columns M thru U. That is what the chart uses. But if you ever want to update the chart, you MUST update columns A thru N.

Feel free to check columns M, R, S, T, & U and let me know if any rows have errors as compared with the TSP share database.
Also, let me know if you see erros from columns A thru N as compared with the YAHOO VIX database. But please don't worry if columns M,R,S,T, & U do not line up row by row with columns A thru N. (Notice the length of the TSP date is shorter than the length of the VIX date column A - and will almost always be shorter if date interval covers any government holidays.)

 

[ayla]

It might have been clearer for you to see this if I would have just provided two data sheets instead of putting the data side by side. I may do that in future uploads.

Attached is a zip file of the new data where yahoo data is separated from TSP data on a separate work sheet. (Had to use zip because size exceeded limits.) You will notice the number of dates in the date columns is not the same for Yahoo and TSP as I explained previously so that hasn't changed.

I filled in Nov1 thru Nov 4 2004 data for the TSP data just to make it look better and be less sloppy but the chart is the same and the results are the same as I posted before with the VIX spiking in the lower right hand corner. But this set of data has more "clarity", I hope others agree.

This set of data should have the formulas that I discovered missing in my earlier Excel data which I'm sure made it more confusing (only values were posted, not the equations that resulted in the values). You will now see the "index" formulas on the TSP data sheet. You therefore can see clearly the primary way I "match up" the TSP dates with the Yahoo dates.

The chart is drawn exclusively from the tsp data worksheet because this set of dates is the "least common denominator".

In order to upload and meet size limit requirements, I had to eliminate some of the Yahoo data columns which aren't necessary for the chart but which did make it easier if anyone else wanted to update this chart with future Yahoo VIX data by simply cutting and pasting. Still can be done but more complicated. Oh well. I also deleted data for F, C and S funds but I fund prices are still included.

 

[Fivetears]