{"id":743,"date":"2013-08-22T13:01:43","date_gmt":"2013-08-22T12:01:43","guid":{"rendered":"http:\/\/tradersnest.wpengine.com\/?p=743"},"modified":"2014-04-23T21:03:08","modified_gmt":"2014-04-23T20:03:08","slug":"lethal-combination-low-vix-warm-weather","status":"publish","type":"post","link":"https:\/\/www.tradersnest.com\/blog\/lethal-combination-low-vix-warm-weather\/","title":{"rendered":"A lethal combination: low VIX, warm weather\u2026"},"content":{"rendered":"

\"\"Look out for a message tomorrow about Martin Carter\u2019s MRP Strategy<\/strong>.<\/p>\n

There\u2019s a lot of sense in trading hedged positions \u2013 as Martin says, this is the safest way to trade, and how all the big players make money from the market.<\/p>\n

Personally, I never believed that hedged trading could be made this simple \u2013 but Martin\u2019s results speak for themselves.<\/p>\n

If you\u2019d like to try it out, you can get your name down for a risk-free trial .<\/p>\n

Beware of warm weather\u2026<\/p>\n

Back in the spring I have to admit to being one of those doom-mongers who was predicting a wash-out summer and seriously considering emigrating to warmer climes.<\/p>\n

As it is, the summer has been a pleasant surprise, even with the slightly cooler, damper weather of the last couple of weeks.<\/p>\n

There have been barbeques (without anoraks)\u2026 pub gardens\u2026 a bumper strawberry crop\u2026 and even a few mosquito bites\u2026 joy!<\/p>\n

But I\u2019m afraid that old doom-mongering devil on my shoulder has been whispering in my ear again: \u2018Have you seen the level of the VIX? You know what it means when the VIX does that while you\u2019re enjoying the August warm weather?\u2019<\/em><\/p>\n

Here\u2019s the rub\u2026<\/strong><\/h2>\n

If you\u2019re not familiar with the VIX, it\u2019s the short name for the CBOE Market Volatility Index \u2013 also called \u2018the fear index\u2019.<\/p>\n

The VIX is calculated on a weighted blend of prices for a range of options on the S&P calls and puts.<\/p>\n

The method of calculation isn’t too important to us \u2013 we simply need to understand that, in essence, it is a gauge of investors’ confidence in the market.<\/p>\n

A declining stock market tends to be more volatile, while a rising market is viewed as less risky.<\/p>\n

For this reason, the VIX in general has an inverse relationship to the market. So, the VIX goes up as stocks decline, and the VIX goes down as stocks go up.<\/p>\n

A low VIX means that traders are confident about market conditions. A high VIX means that they are fearful.<\/p>\n

These charts show the S&P index and the VIX over the last six months \u2013 note how every spike in the VIX is accompanied by a dip in the S&P\u2026<\/p>\n

\"\"<\/p>\n

So, at the moment, we have a low VIX\u2026 That\u2019s good news, right?<\/p>\n

Of course, the problem with a low VIX is that everyone starts to predict a bottom, which means a end for the rising equities markets.<\/p>\n

Here\u2019s some history\u2026<\/p>\n

From 1990 to 2012, the VIX hit its low for the year in the summer 16 times. And 14 of those 16 years, the low was followed by a spike before the end of the September.<\/p>\n

\"\"<\/p>\n

\"\"<\/p>\n

\"\"<\/p>\n

Looking back over this period shows that the VIX rose in the August\u2013September window on 14 out of 23 occasions, with an average gain of 13.1%.<\/p>\n

Our conclusions\u2026<\/p>\n

The S&P is certainly due to stop and take a breath on it\u2019s meteoric climb \u2013 and when an index is in uncharted territory like this, it\u2019s notoriously difficult to judge where that will happen.<\/p>\n

We just don\u2019t have any historical resistance levels for it to get stuck at.<\/p>\n

That\u2019s why the VIX is very useful as an indicator that things could be about to turn in the equities markets.<\/p>\n

Keep a beady eye on the VIX, as an upward surge here is like a canary for warning us that the S&P is about to take a tumble.<\/p>\n","protected":false},"excerpt":{"rendered":"

Look out for a message tomorrow about Martin Carter\u2019s MRP Strategy. There\u2019s a lot of sense in trading hedged positions \u2013 as Martin says, this is the safest way to trade, and how all the big players make money from the market. Personally, I never believed that hedged trading could be made this simple \u2013 […]<\/p>\n","protected":false},"author":7,"featured_media":744,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[10],"tags":[],"yoast_head":"\nA lethal combination: low VIX, warm weather\u2026 - Trader's Nest<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.tradersnest.com\/blog\/lethal-combination-low-vix-warm-weather\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A lethal combination: low VIX, warm weather\u2026 - Trader's Nest\" \/>\n<meta property=\"og:description\" content=\"Look out for a message tomorrow about Martin Carter\u2019s MRP Strategy. 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