Click on Chart to Enlarge
The chart above is the daily VIX with a 63 period Time Series Forecast (TSF) study overlaid. I mentioned this indicator in January when looking for a sell signal, because the indicator has been very good for market timing purposes in this bear market. Even from January to March 2009 when the VIX was range bound, this indicator did a good job in marking the turns.
This study is used like a moving average. Basically a buy or sell signal comes when price moves from one side of the line and closes on the other side. So in this case, since the VIX moves the opposite direction as the market generally, a VIX close above the line would be a sell signal. So it is very simple to use. For confirmation you could wait for a second close above the line rather than just one.
I bring this chart up today because I have been watching it, and there is a chance that the VIX could rise this afternoon and close above the TSF line.
Pete
Hi Peter
ReplyDeleteIt looks like you were correct - The VIX did rise above the TSF(63) today.
I'm a fan of linear regression studies but haven't used the TSF before. How did you come to a value of 63 for the daily charts?
Do you have settings for intra day charts that you can share?
Thanks
Hey Chris
ReplyDeleteI look for a close above the line rather than just a move above it. From my chart, I don't believe the VIX closed above the TSF 63 line....maybe tomorrow??
As far as using the 63 period versus others.......a 50 period TSF has done well for the VIX, but has given a couple false signals (early basically). There are about 63 trading days per quarter (21 per month, times 3) and that particular setting has really not given false signals for the entire bear market, especially if you wait for a second close above the line. It would be nice to see this signal confirm the VIX/VXV signal from last week.
Honestly, I don't use that study on anything except the daily VIX chart. So I don't have any intraday setting, etc.
Pete