What concerns me is the divergence between the VIX and ES. Usually they are inverted but VIX broke above it's bear trend line on Wednesday and ES did not break it's mirror bull trend line until Friday. Furthermore VIX is already at the high side of it's 3 month range while ES is still at the high side of it's 3 month range. VIX futures are still well in contango so I don't think a break down in ES is probable at this time. Can anyone explain this unusual behavior as I don't think of put buyers (the VIX) as "smart money"? http://www.tradingvolatility.net/p/data ... ldocs.html
I treat the VIX as a "number" rather than as a price, since it is not available to us for retail trading.* --* June 3 to June 10:
When the VIX reached a low of 12.90, UVXY reached a new low of $9.86; (My buy limit of $10 was reached).*
When the VIX reached a low of 12.72, UVXY reached a new low of $9.35;*
But then the VIX went up to 17.33, and UVXY went up to $12.21; (My sell limit of $12 was reached).*
The move from $9.35 to $12.21 is an increase of 30.6%. My gain from $10 to $12 was 20%.*
The move from 12.72 to 17.33 is an increase of 36.2%. (There is not a definite correlation between these two, but this can be used as one data set).* --* April 19 to April 29:
Previously, when the VIX reached a low of 12.98, UVXY reached a low of $14.70; (My $15 buy limit was reached). Then the next day the VIX dropped to 12.50, but the UVXY low was up to $14.90;*
The VIX went up to 17.09, and UVXY went up to $18.50; (I set a sell limit which was too high, so I missed it).*
The move from $14.70 to $18.50 is an increase of 25.9%. The move from 12.50 to 17.09 is an increase of 36.7%.* --* 05/27/2016,,,11.39,,,,10.84,,,,,,13.76,,,13.04
When the VIX recently dropped to 13.04, UVXY reached $10.84; This would have given a very small gain.* --* April 1 to April 7:
On April 1, the VIX number dropped to 13 exactly, and UVXY dropped to $17.97 on April 4. On April 7, the VIX number went up to 16.77, and UVXY went up to $22.93.*
The move from $17.97 to $22.93 is an increase of 27.6%. The move from 13 to 16.77 is an increase of 29%.*
--* CONCLUSION:
There seems to be a point at which the VIX number hits bottom, and pops up quite a bit shortly afterward. This year, that point seems to be below 13. If it's any higher than 13, then it doesn't pop up noticeably.*
The critical VIX number which represents the low point is usually lower in other years than it is this year. But in any case, there does seem to be a critical bottom point, which almost guarantees a big pop up. Recently, the VIX has jumped from 13 or less to 16.77 or more, three times.*
The trick is that the bottom turning point is not exact, and it can easily change.* --*
There was a low for the VIX of 10.88, and a low for UVXY of 24.34, on August 5, 2015.*
08/05/2015,,,25.81,,,,24.34,,,,,,12.72,,,10.88
UVXY dipped just a little bit lower in December, to 23.83:
12/02/2015,,,26.80,,,,23.83,,,,,,16.49,,,14.71
UVXY did not go any lower than that until March 17, 2016. But then it started dropping relentlessly.*
03/17/2016,,,25.74,,,,23.31,,,,,,15.38,,,13.82
Last year was an unusual situation, and there is no reason to believe it will be repeated. But it's important to note that this DID happen, and it was just last year.*
There was a "floor" under UVXY, which kept it from dropping below $23.83 for over 7 months, after it reached $24.34 in August 2015.*
I have copied the charts from vixcentral, but the numbers change throughout the night, so they are not exact. This is referring to the contango or backwardation between the first and second month, on the night after the date given.*
Look at this set of price numbers below, (with dates from bottom to top), and see how price changes follow the supposed indicators. It has been my observation that prices often DO NOT move the way the contango experts suggest.*
Starting on Aug. 18, 2015, the UVXY high price and the spot VIX gradually go up, even though the VIX is under 20, and the futures are in contango.*
The UVXY price goes from a low of 24.97 on Aug. 18, 2015 up to a high of 42.25 on Aug. 21, 2015, with the PREVIOUS DAY futures in contango. This is a jump in price of almost 70%, with the previous day's futures in contango. If waiting for backwardation was your signal to buy the next day, it would not have worked.*
Of course, on the day that UVXY reaches $42.25, the futures do go into backwardation, and the VIX spikes up above 28. But this is on the day that it jumps, not the day before.*
With a spot VIX at 28.38, (that is, above 25), and with backwardation -6.51%, the high price of UVXY goes even higher the next trading day.*
But on the next day when the price jumps, the spot VIX goes up to 53.29, and the backwardation increases to -8.79%. So it is no wonder that the price of UVXY goes up.*
In other words, the price of UVXY tends to go up when the spot VIX goes up, and go down when the spot VIX goes down, regardless of the previous day's numbers for spot VIX, or for contango and backwardation.*
The price of UVXY goes DOWN from Aug 24 to Aug 25, 2015, even though the futures are in heavy backwardation, and even though the spot VIX is above 25 for the LOW, and had just set a record high point.*
UVXY does eventually go higher, on Sept 1, 2015. But there is no apparent reason why it should go up, or why it should go back down the next day, based on the indicators we're supposed to be watching.*
--* (I am getting the best results here with 175% enlargement on my screen. Adjust the image size to keep the numbers on a single line). --* DATE,,,,,,,,,,,UVXY,,,UVXY,,,,,VIX,,,,,,VIX
08/17/2015,,,26.84,,,,25.13,,,,,,14.52,,,13.01,,,,,contango 9.20% --* (I'm having trouble here, because I somehow had the closing price of 40.74 listed in my information as the high of Aug 24. 2015, instead of 53.29; There may be other mistakes, but these are the numbers I have for now, until corrected).*
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