Reasons Why VXX VIX Volatility Crash May Have Hit Bottom and Turned UP


Nov 16, 2012


Chart 8-1116
Reasons Why VXX VIX 
Volatility Crash 
May Have Hit Bottom and Turned UP

We accidently stumbled onto and discovered while trying different moving averages that — when 10 Run Weighted Moving Average 10wRMA crosses zero VXX up and down price trends STOP or REVERSE Predictions are 100% right so far, some pretty good early signals and no false signals. Very unusual for us. We do not recall ever seeing any forecast or prediction of anything non-predictable that comes close to being 100% right. This discovery may be important and useful if it proves out in 'real time,' especially for options and futures traders and savvy investors. This breakthrough will be announced in a major financial publication. This page may prove to be the most important page you read here. Frog says, "Go for it. Finally a winner. This dog's gonna fetch." Got it Frog. You're the master of metaphoric oxymora and hopefully perception. Predicting VXX price trends is simple and easy — all you have to do is see when the red line in Charts 1-3 crosses zero. You don't have to know any math, statistics, standard deviations, calculus, etc. If LOG's are confusing, just think of the green lines as VXX spread out to better see its changes. We define: Run as one or more consecutive days of VXX closing price up or down. Through Aug 31, there were 191 Runs since Jan 3, 2011 — 95 up (1.9 days avg), 96 down (2.5 days avg), 7 days maximum Runs, 421 days. See Table 1 below for Runs History. Trend when 10wRMA has same sign (+) or (-) for two or more consecutive Runs. Through Aug 31, there were 13 UP and DOWN Trends since Jan 3, 2011, longest 98 days DOWN, from Nov 28, 2011 to Apr 16, 2012, X-axis 115 to 73. Time Span as the duration of 10wRMA having same sign (+) or (-) measured along the X-axis in Charts 1-7 below. Optimized 10 Run Weighted Moving Average 10wRMA in charts 1-3 and 6-7 below eliminates 12+ 'rogue predictions' of one-day Runs up and down. Chart 1-1019 10wRMA with Standard Deviations of 10wRMA Chart 2-1019 10wRMA with VXX Runs Chart 3-1019 Contributions of (+) and (-) Runs to 10wRMA Chart 4-1019 VXX Predictions by Cumulative Runs Factor CRF Chart 5-1019 Correlation VXX Actual & Cumulative Runs Factor CRF Chart 6-1019 10wRMA Slope, calculus 1st derivative Chart 7-1019 10wRMA Slope Change, calculus 2nd derivative (Y-axis in charts is Log (y) unless shown otherwise) Up / Down Trends are primarily controlled by (+) / (-) Contributions of Runs to 10wRMA, Chart 3: Increasing Contributions of (+) Runs are generally leading indicators of UP Trends before and as soon as UP Trends begin. Decreasing Contributions of (+) Runs are generally leading indicators of DOWN Trends before and as soon as UP Trends end. Increasing* Contributions of (-) Runs are generally leading indicators of DOWN Trends before and as soon as DOWN Trends begin. Decreasing** Contributions of (-) Runs are generally leading indicators of UP Trends before and as soon as DOWN Trends end. * more negative ** less negative Trends' strength appears inversely proportional to 10wRMA Standard Deviations, e.g. high SD low strength. Trends are strongest when both (+) / (-) Contributions of Runs to 10wRMA have same slope sign, calculus first derivative, more so at Trends' beginnings. Trends are weakest when both (+) / (-) Contributions of Runs to 10wRMA have different slope sign, calculus first derivative, more so at Trends' ends. 10wRMA is leading indicator of Trends' reversal before crossing zero. Trends reverse when 10wRMA crosses zero. Most surprising — near-perfect correlation, one-to-one, R2=0.9860, of Cumulative Runs Factor CRF predicting VXX, Chart 5 — surprising because CRF is the cumulative-sum of the alternating series of only 13 Run-integers -7 to +6 below:



 


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