Investors can get an idea of when the market may reverse when the 10 Day Moving Average (MA) of the Volatility Index (VIX) becomes significantly stretched away from its 10 Day Moving Average (MA). A simple example is shown below which compares the 10 Day MA of the VIX to the S&P 500.
Notice when the VIX got stretched significantly away from its 10 Day MA (blue line) to the upside (points A) that the S&P 500 made a bottom (points B) and then reversed to the upside.
Thus keeping track of where the Volatility Index is in relation to its 10 Day Moving Average can give investors a clue to when the market may be getting close to a near term bottom and possible upside reversal.
No comments:
Post a Comment