StockFetcher Forums · General Discussion · VIX variance vs. 10 day moving average<< 1 2 3 4 5 >>Post Follow-up
BarTune1
361 posts
msg #78683
Ignore BarTune1
9/5/2009 12:02:31 PM

Hello,

I have been using some of Larry Connors technical indicators to trade with quite a bit of success. In any event, I was trying to write a filter that would automatically caclulate the variance in the VIX vs. it's 10 day moving average. I have used Larry's rules that when it is >5% the market is very oversold and when it is <5% it is very oversold. So, I watch this discrepancy every trading day, but have to calculate it manually.

I tried to write a filter to calculate this by adding the ^VIX to a watchlist and then applying the a filter that simply applied that watchlist to a filter that indiated LAST, ma(10), and the variance as a %. That way, I can just click the filter and it gives me the reading.

Problem is, the filter seems to only want to recognize stocks as opposed to indexes .... (i.e., the VIX is ^VIX).

So i have applied the filter to the symbols VXX and VXZ as proxies as those ETFs are susposed to mimic the VIX. However, the tracking error is pretty large using those symbols.

Is there a way for me to have the filters recognize indexes such as ^VIX?

trendscanner
265 posts
msg #78690
Ignore trendscanner
9/5/2009 2:54:54 PM

I have an idea that might work. If you let me know how the variance is calculated, I'll try it and see if it works.

BarTune1
361 posts
msg #78691
Ignore BarTune1
9/5/2009 3:09:29 PM

Connor's theory is that the VIX is a dynamic indicator thus the only thing that matters is where it is currently, versus the 10 day moving average. So, the variance is pretty simple as it is (current value / ma(10)).

I try to limit my stock buying until the VIX is +5% higher than the ma(10) and I short when the VIX is -5% or more than the ma(10). I have been very successful following this rule.

If you were to compare a chart of the SPY vs the VIX when it stongly diverges from it's ma(10) you can see that it picks tops and bottoms all the time.

In any event, i have no problem calculating it manually but it sure would be nice if i had a filter calculate it automatically for me .....



wantonellis
102 posts
msg #78693
Ignore wantonellis
modified
9/5/2009 3:17:04 PM



trendscanner
265 posts
msg #78694
Ignore trendscanner
modified
9/5/2009 3:49:19 PM

Here's one way to set it up as you described - VIX below the 10 day MA shows as positive variance; VIX above 10 dayMA is negative variance.

Fetcher[
set{vix, ind(^VIX, close)}
set{vix10ma, cma(ind(^VIX,close),10)}
set{ratio,vix / vix10MA}
set{var, 1 - ratio}

add column var
add column vix
add column vix10MA
draw vix
draw var
]



I think this is what you're looking for.

BarTune1
361 posts
msg #78695
Ignore BarTune1
9/5/2009 4:03:51 PM

ok, thanks that screen is pretty close to what i was looking for .... can another line be added to divide the "close of the VIX" over the "10 day moving average of the VIX"? Then I would simply apply the filter on a limited basis so i can easily see the variance ....

sorry for the trouble, I just joined last week .... had success writing a number of formulas but this one is causing me trouble ...

Eman93
4,583 posts
msg #78696
Ignore Eman93
modified
9/5/2009 4:04:15 PM

VIX is high time to buy, VIX is low time to go........

Nice info Thanks............

Kevin_in_GA
3,976 posts
msg #78697
Ignore Kevin_in_GA
9/5/2009 4:06:10 PM

A suggestion - use Bollinger Bands. They are a measure of the variance from the moving average, just calculated using standard deviations rather than percentages.

Bollinger Bands

Use Bollinger Bands(10,2) or even easier, use the Bollinger Oscillator. I would add these into a watchlist which contains ^VIX as well as the stock you might typically trade based on a ^VIX signal. You can then look at the Bollinger Oscillator(10,2) for ^VIX (you can't graph the Bollinger Bands for indices, an unfortunate limitation of SF).

If it is above 100, it has closed above the 2 SD band (fairly high and relatively uncommon occurrance). This would be your BUY signal. If it is below -100, it has closed below the lower band. That would be your SELL signal.

These would act exactly the same as the 5% variance trigger. Just determine what number of standard deviations typically coincides with your 5% threshold.

Stockcharts.com lets you put indicators on Indices.

VIX with Bollinger Bands

Eman93
4,583 posts
msg #78698
Ignore Eman93
9/5/2009 4:12:19 PM

trendscanner
- Ignore trendscanner
modified 9/5/2009 3:49:19 PM

Here's one way to set it up as you described - VIX below the 10 day MA shows as positive variance; VIX above 10 dayMA is negative variance.


Fetcher[
set{vix, ind(^VIX, close)}
set{vix10ma, cma(ind(^VIX,close),10)}
set{ratio,vix / vix10MA}
set{var, 1 - ratio}

add column var
add column vix
add column vix10MA
draw vix
draw var
]




I think this is what you're looking for
________________________________________


I think you have it so above the MA10 is negitive........look back to to sep 2 vix was above the MA10 should be +.12 not -.12

I think it fine just remeber that - is above MA10




BarTune1
361 posts
msg #78699
Ignore BarTune1
9/5/2009 4:37:28 PM

thanks all and thanks Kevin, I have been following closely your other posts on Bollinger Band entries .....

StockFetcher Forums · General Discussion · VIX variance vs. 10 day moving average<< 1 2 3 4 5 >>Post Follow-up

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