Saturday, January 25, 2014

2014.01.24 VIX Cycle Model Chart

2014.01.24 VIX Cycle Model

The VIX cycle model once again suggests that higher VIX prices are to be expected over the next year. However, astute readers will notice that as shown above, the turning points are better predicted than the magnitude of the change at those points. Right now, according to the model, the VIX is "ahead of itself" and a very short term correction, as happened after previous positive and negative spikes, is very likely.  The previous model output is shown below.

2013.12.13 VIX Cycle Model


Permabear Doomster said...

Hmm..I came up with a simple VIX pull back..maybe 15/14.50 or week.

That'd be a very viable long-VIX level, before the next equity wave lower.

For me, the only issue is how high will the VIX be..when low sp'1600s...30s...or 40s? The latter sure look difficult.
- least next week won't be dull! Have fun!

Paolo said...

Thanks for your insights, Permabear. On a cyclical time scale, in my hands at least, I have not been able to model those spikes up and down that VIX is known for, especially when the volatility of volatility (VVIX) is rising. I have done a passing job with a very short term neural model, but the neural model is designed for pure timing, and gives no indication of magnitude, and whatever "structure" it contains is not interpretable by ordinary humans.

As far as next week being fun, that might be too strong a word. Good luck!

Paolo said...

I have been meaning to stick my neck out and post VIX Cycle Chart - Long Term