Airedale re: the $VIX
To say there is no correlation is a bit extreme. Few indicators demonstrate 100 percent correlations, and even with the Hurst cycles, we have to bend a bit here and there to make it fit.
In fact, there is a mountain of evidence showing there is at least some correlation between the VIX and broader market performance. Is it difficult to make specific trades based on the VIX? Yes. Do we know the exact meaning of the low VIX now? No, probably not.
Do I think that it should be one factor in the overall interpretation of the market as it is now? Yes. Does it suggest the market is more precarious now? I think so. Does it imply we may not see a vigorous, propelled move up from these levels? There's a reasonable chance.
All market systems--any system of analysis including Hurst cycle analysis--can only suggest *possible* market moves. Any hypothesis--any projected possibility--remains just a possibility until lines are crossed, resistance is overcome, or trendlines are broken. As such, the VIX is as valid an indicator as any other. It suggests a possibility. It provides evidence of a possible outcome. It hints at a hypothesis. Now as a wise trader, I want evidence that supports or rejects or modifies the hypothesis.
The VIX hints of market weakness, and that's what we have been witnessing. Hypothesis supported. If tomorrow we rally hard, hypothesis rejected.
You may say that the VIX is then worthless. Well, the same proof is required of any Hurst analysis as well. You can project we rally from now into March, but until the SPX surpasses the December 31 high, it remains a mere possibility. Perhaps a likely possibility, but any number of causes could prevent it actually occurring. So we wait for evidence to support our hypothesis.
Regarding the VIX, it is just one piece of evidence to consider in conjunction with many others. The last time we discussed this issue, you said that the VIX means nothing. But it meant something to me, and privately I predicted a prolonged downturn during January. It turns out the evidence supported my hypothesis. Did the VIX predict this market event? Maybe, maybe not. I will continue to evaluate the VIX as one piece of evidence in my trading because I find it informative. Informative just as a single piece of evidence in a world of information which includes the Hurst cycle analysis.
Just my take for what it's worth.
Black
AI
