Monday, July 8, 2013

Weighted Average Standadized VIX Continues to Point Toward Higher Risk

A number of market commentators have been discussing the VIX coming off the 20 level in recent trading sessions, recently at about the 15 demarcation. Despite this downward move, the weighted average standardized VIX (WASV) still points towards higher risk levels in equities. I developed the WASV in an attempt to better use the VIX data to make investment calls. Essentially, the WASV and the subsequent model smooths out the extreme volatility in the daily/weekly VIX movements. The below presents the latest WASV and the standardized skew data through today's trading.

WASV- 2.01


Standardized Skew- 0.36


The WASV continues to trade higher while the standardized VIX skew moves downward. This is an indication of increased risk in equities and suggests caution.  I also note the Price/Volume Diffusion Index is just hanging above the 50 demarcation, and that one or two negative movement days would push this indicator into negative territory.

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