Friday, March 12, 2004

There's sometimes a fine line between statistics and practicality, but in looking at the behavior of the VIX, here is an interesting phenomenon.  Looking at how the VIX (the old formula) performance one day lead to performance in S&P 500 futures the next day, today's action is notable.  Since 1986, any day where the VIX closed 10% or more below its open that day, the S&P 500 futures made a higher high the next day 78% of the time (by 0.6% on average).  Also, the next day's low in the S&P was higher than today's low 88% of the time (meaning there was only a 12% of the next day dipping below today's low). If the VIX should fall a bit further today, it would bode well for additional follow-through on Monday.  In addition to this, the Monday of expiration week has been positive 64% of the time over the past 9 years.  Neither of these are enough to base a trade on by themselves (or even in combination), but if we close well today it suggests that it is likely we would see some follow-through to the upside come Monday, all else being equal. 3:07:48 PM

While decimalization has certainly had an impact on the TRIN, I would like to point out something I find very interesting.  Since 1965, there has never been an instance of the NYSE TRIN closing above 2.0 for three straight days, like it has coming into today.  However, there have been four instances of it closing above 2.0 for 3 out of the past 5 days: August 1982, October 1987, March 2001 and June 2002 Like I said, I'm not sure how applicable these are to our current situation, and of  course it's only four instances, but I thought I'd put it out there. 10:40:18 AM