VIX ETN: The Sentimental Dinosaur – RSI & P/C Data (TVIX, VXX, VXZ, XIV, VQT)
John Townsend: I’d like to introduce you to an acquaintance of mine. I call him the Dinosaur of Sentiment, the Sentimental Dinosaur and just plain T-Rex for short. His real name, however, sounds like T-Rex, but is actually spelled TVIX. And TVIX is actually short for his full family heritage and description which is VelocityShares Daily 2X VIX Short Term ETN (NYSEARCA:TVIX) (and I thought the names at school were tough to remember).
Anyway, TVIX is a volatile fellow. He falls in price when people are happy about the stock market – when their ‘sentiment’ is happy and confident. But when investors get scared and start running for the exits, TVIX gets his toes stepped on by investors – hard – and he jumps skyward like a cat climbs a tree when chased by a big mean barking dog.
Right now TVIX is taking a nap. Shhhh…… please don’t disturb him. Let’s tip-toe to a 4 Hour chart of TVIX and see him asleep, but also observe what happened to him the last time investors decided to awake him rudely.
We see he is fast asleep – resting comfortably around the $24 price range. But a day or two before Halloween last fall, when the S&P 500 daily cycle last topped, poor TVIX jumped 67.5% in two days. I heard he had his feet in a bucket of ice for days afterward, trying to get the stampede induced swelling to abate.
And right now it kinda looks like some investors are starting to nudge him and see if he would like to wake up now. That TSI is just daring him to come out of his slumber. One little slip across that green line may be all it takes to wake him up immediately.
This Daily Chart of TVIX tells us he may have a few more days to slumber. If he is really lucky he may even get to sleep in this Saturday and Sunday. But after that I doubt he will get much rest.
Pleasant dreams T-Rex….. while they last.
What follows are a couple of charts from www.IndexIndicators.com. The top portion of the chart looks at the RSI (10) of the SP-500 and yields a standard deviation calculation of the number of stocks reading over 70. The bottom portion of the chart looks at the Total Put/Call volume ratio and also calculates a standard deviation figure to assess the relative degree of bullish/bearish sentiment.
In both charts we see, mathematically, just what we would expect to see near the conclusion of a SP-500 daily cycle. That is, a high degree of its stocks reading in excess of 70 on their RSI (10) and an unusually low amount of interest in buying puts as compared to interest in buying calls. I mean, if the stock market is going to go up forever you would buy calls, right?
Related: VelocityShares Daily 2x VIX ST ETN (NYSEARCA:TVIX), iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX), iPath S&P 500 VIX Mid-Term Futures ETN (NYSEARCA:VXZ), VelocityShares Daily Inverse VIX (NYSEARCA:XIV), Barclays ETN+ S&P VEQTORT ETN (NYSEARCA:VQT).
The TSI Trader offers technical analysis of the stock market, gold and selected mining stocks using the True Strength Index (TSI). The True Strength Index is a sophisticated ‘low-lag time’ momentum indicator. Projected earnings of mining company stocks are provided weekly by Bill Matlack’s Metals & Mining Analysts’ Ratings & Estimates report published at Kitco and are used to highlight some mining stocks for study.