For most of 2011 SPY’s has been quite a bit higher than 2005 values for the same day, but this August there were 3 days where SPY closed within a half a point of its equivalent 2005 close. If this coincidence continues to be predictive, we won’t be starting a bear market for a while. Normalized volume for the last year has been quite a bit lower than 2005, but recently this has been at 2005 normalized values. The differences in the VIX volatility levels however are pretty stark—for whatever the reasons, our current market is a lot more volatile.
Hi Andrew and Vance,
Yes, I agree with both of you.
My prediction is XIV will around 15 when VXX dips back to 19.88. What about your prediction?
Vance,do you have a record for how many days VIX futures in backwardation this time?
And what about 2008? How many days VIX futures in backwardation?
Lok, at first XIV and VXX look like mirror images since XIV is helped by contango/hurt by backwardation, while VXX is hurt by contango/helped by backwardation. What breaks the symmetry is that XIV is forced to rebalance its position everyday so that it properly tracks percentage changes in an inverse fashion to the volatility index it tracks. This ‘inverse ETF effect’ gets worse the higher the volatility of the index (ie the volatility of the volatility), which is very high during this period. So I predict that by the time VXX dips back to 19.88 that XIV will be significantly lower than 19.36…
Hi Lok & Andrew, I agree with Andrew’s analysis. The only thing I will add is that VXX will likely continue its path toward 0, driven by longer periods of contango than backwardation. Because of this eventually XIV will recover and exceed its previous highs–assuming the typical ratio of fear driven vs greed driven periods holds.
— Vance
Hi Vance,
Looking back to XIV and VXX, on July 7th 2011, VXX reached its low at 19.88, while at the same time XIV reached its high at 19.36.
I wonder will XIV reach its high again (19.36) by the time VXX reach its low again (19.88)?
Or will the XIV less than 19.36 by the time VXX reach 19.88?
I have data on the VXV going back to 2007. Is their data going back further and do you know where I can find it?
Keep up the great posts!
John
Hi John,
I didn’t do an extensive search. The VXV data I found on the CBOE site went back to 4-Dec-2007. They had graphs that went back a lot further, so obviously they have the data. It might be elsewhere, or we might need to lobby them a bit.
— Vance