VIX is an option against a fall in the S&P 500 with a 30-day expiry period. VIX and S&P 500 will thus normally be inverse in that they move in the opposite direction.
There's a few times where it's not quite like that. Based on historical data, this suggests that in these cases we can predict whether we have a bottom in the market, respectively top. At least that's the hypothesis.
Refers see link down.
If we apply it to the situation now, we see that even though the S&P 500 went down, the peaks of the VIX were lower and lower. According to the hypothesis, we should have a bottom in the market, and it won't come down any further.
One can also, the market believes that we are so low that the probability of us getting further down becomes smaller and smaller.
There's a few times where it's not quite like that. Based on historical data, this suggests that in these cases we can predict whether we have a bottom in the market, respectively top. At least that's the hypothesis.
Refers see link down.
If we apply it to the situation now, we see that even though the S&P 500 went down, the peaks of the VIX were lower and lower. According to the hypothesis, we should have a bottom in the market, and it won't come down any further.
One can also, the market believes that we are so low that the probability of us getting further down becomes smaller and smaller.
