VIX

Is it Time to Go Long...NO

Yesterday I discussed a few indicators that I look at that express market panic.  They were also featured on CNBC's Mad Money.  Today I want to explain another indcator to look at:  VIX Futures.  As many of you know when the VIX futures are backward, the market has a negative expectancy (its going to go down).  Just how much of a difference does it make?  Take a look at this chart.  One is the SPX,  the other is the SPX if one goes to cash the day after Futures go backward between m1 and m2.

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Think It's Time to Go Long?

The answer is no.  The table below shows 6 things:

1.  Points gains in the SPX has done since July 2002

2.  Points gained in the SPX has done, when in cash when VIX is 5 points over VXV

3.  Points gained in  the SPX has done when in cash when VIX is 5 points over VXV OR VIX is over 40 points.

The second set shows the above, only stopping at the end of 2012.  I did this to take the latest bull market out of the equation (notably 2013) as we have gone through one of the longest straight up markets in history.

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Our Founder on Bloomberg Talking $VIX and $VIX Futures