The CBOE has launched a microsite within the CBOE website that has information about all of the volatility-based Exchange Traded Products (ETPs). The website is located at http://www.cboe.com/voletps.
VXX and XIV are two of the most liquid and popular ETPs (both are Exchange-Traded Notes), but there are many others.
The market blasted into the new year with a strong rally that has dominated the first three days of trading. The strength of this move is evident in the fact that on both January 3rd and 4th, $SPX gapped to new all-time highs. We have mentioned several times in the past how impressive this market has been with upside gaps to new highs over the past year. Thus, the $SPX chart remains bullish.
$SPX remains in a strong uptrend, with all averages rising on its chart. It is going to close out the year well above its rising 20-day moving average -- a moving average that it has touched only once in the last four months. You can't find an uptrend much better than that.
The equity-only put-call ratios had been in a more or less steady decline during this last month, as call buying has reached extremes. Now they have begun to rise from those multi-year lows, generating sell signals.
The stock market euphorically gapped to new all-time highs on Monday, after the Tax Bill had been passed over the weekend. Pessimists might say that a gap to a new all-time high, on "the news," is a selling opportunity. They might be right, but it's really to soon to tell. One would have to see $SPX break some support areas before that could be confirmed. The bottom line is that the intermediate- term trend of $SPX is still up.
The post-Thanksgiving seasonal period got off to a rousing start perhaps too rousing. The $SPX chart remains positive as long as it holds above support. The first support level is at 2600, which is the recent highs and also near today's (Friday's) lows.
The stock market has signaled that whatever was holding it back for the past couple of weeks ("correction" would be too strong of a word) is over. $SPX and all the other major indices have broken out to new closing and intraday all-time highs. This includes the previously-lagging Russell 2000 Index ($RUT, IWM).
$SPX remains in a bullish trend, despite breaking one support level this week -- a level which it quickly recovered. There is support at 2557 (Wednesday's low, from which prices have rallied over 30 points in a day). Below that, there is support at 2545 (the October lows), and then the major support at 2510 -- the September highs, and the area which launched the current leg of this long market rally.
This article was originally published in The Option Strategist Newsletter Volume 9, No. 7 on April 13, 2000.
The CBOE’s Volatility Index ($VIX) has been a stalwart for option traders and technicians since it was introduced in the early 1990's. The $VIX measures the implied volatility of $OEX options. However, in recent months, the trading in $OEX options has slowed dramatically, and many traders have forsaken them for the more active and volatile equity options – especially NASDAQ options. As a result, $VIX is becoming harder to interpret. Therefore, we thought that perhaps another Volatility Index could be constructed as a useful supplement to $VIX. It would be a “supplement” rather than a “replacement” because there may come a day when most speculators return to the $OEX market. If that were to happen, then $VIX would regain its former place as a premier measure of public sentiment.
A few of our subscribers have been rather nervous about the fact that the mBB sell signal has not produced immediate results. The sell signal occurred on October 25th, with $SPX roughly at 2557. Even though $SPX has rallied about 1% since then, it has not come close to stopping us out – an action which would require $SPX closing above the +4σ Band. Since that Band has raced away to the upside, we have a trade that is sort of in suspended animation if you will. We bought puts to enter the trade, so one knows exactly what his maximum dollar loss could be. However, we are still of the opinion that this market is tiring out and the sell signal still has a good chance to work.
