|2015.02.13 VIX Cycle Model Chart|
The VIX cycle model suggests continued upward pressure on VIX, especially given the current Z-score of 3.4. The usual caveat is that this model is useful for estimating longer term direction rather than day-to-day swings in price. Back in August of 2014, the VIX cycle model suggested a gradual rise into 2015. The timing was more accurately predicted than the price levels. That model run is on the blog and also shown below. The difference between the actual and predicted is an important input into a neural net model I use, since it contains the cyclical information, but there are other factors used in the neural net model that clearly influence short term behavior which cannot be captured by cyclical analysis.
|2014.08.01 VIX Cycle Model Chart|