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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
* Major World Market Indices * Futures Markets * U.S. Sectors and ETFs * Commodities * U.S. Bonds * Forex

N.B.
* The content in my articles is time-sensitive. Each one shows the date and time (New York ET) that I publish them. By the time you read them, market conditions may be quite different than that which is described in my posts, and upon which my analyses are based at that time.
* My posts are also re-published by several other websites and I have no control as to when their editors do so, or for the accuracy in their editing and reproduction of my content.
* From time to time, I will add updated market information and charts to some of my articles, so it's worth checking back here occasionally for the latest analyses.

DISCLAIMER: All the information contained within my posts are my opinions only and none of it may be construed as financial or trading advice...

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Friday, May 11, 2018

VIX "Normal" Price Range Using TPO Profile Study

TPO stands for Time Price Opportunity. By using a TPO profile chart, you are able to analyze the amount of trading activity, based on time, for each price level that the market traded at for any given time period. The Point of Control (POC) is the price where it spent the most time during that period and in that timeframe.

If you look at the following monthly chart of the VIX with the TPO profile study added to it along the right hand side, you'll see that its POC (on a monthly basis) since 1986 is 20.53.

Whereas, the TPO POC on a daily timeframe from 1986 is 14.66, as shown on the daily chart below.

This tells me that the average "normal" range of the VIX during the past 33 years is between 14.66 and 20.53, regardless of its trading activity on either a monthly or daily timeframe.

I'd also go a bit further and say that any time it traded outside that range for any length of time, it was "unusual" and, therefore, unsustainable...something to consider when you're taking longer position trades in equities.

As of Thursday's close, the VIX was trading in "unusual" territory at 13.23...below the "normal" range, where it has spent most of its time since the November 2016 general election.

The last time it spent the majority of its time below the "normal" range was from 2005 to 2007 leading up to the 2008/09 financial crisis.

Is today's trading environment any different than it has been during the past 33 years where we'll see the VIX held below its "normal" range for a very long time going forward? We'll see...

VIX Monthly

VIX Daily