Friday, May 29, 2015

2015.05.29 VIX Cycle Model Chart

2015.05.29 VIX Cycle Model Chart

The VIX cycle model continues to suggest a gradual increase in VIX levels with an upward acceleration in the September 2015 time frame. Below is the previous iteration of the model, also shown here on the blog. 

2015.03.06 VIX Cycle Model Chart


Permabear Doomster said...


Even a VIX in the 20s would be something this summer/autumn.

VIX 30s sure would be far more interesting though. 40s.... look highly unlikely, as the QE continues... along with low rates.

Good wishes for June!

Paolo said...

Good evening Permabear

The further out in time for the predictive curve, the more error on the price level, such is life. However, I'd bet on at least a small rise in the next few weeks based on the recent model run.

It is funny how in the past rising rates correlated with economic recovery as capital moved out of bonds into equities, whereas the theme now seems to be that low rates are a sine qua non for maintaining equity prices.

June should be highly amusing!

Permabear Doomster said...

I have to say, I'd still think higher rates will be a positive for the economy.. and the broader equity market.

Sure the market might sell lower initially... but I'd guess we'll climb for another few years before the QE/paper bubble blows up.

Paolo said...

Permabear, if we were having this discussion ten years ago, I would agree with you 100%. In the current rate squeeze engineered by central banks, I don't think the equity market will respond in a positive fashion, since a lot of investment decisions have been munged by fiat, rather than market rate data. Ergo, the investment decisions made going forward assume that there is a lot more capital out there than actually exists. What does exist is debt masquerading as free capital, which is exactly the behavioral modification response the Fed has set up. Make the markets believe there is a lot of free capital ie savings, and business will expand. It does not seem to be working that well.