There have been two recent discoveries that are relevant to the Bull Vix algorithm’s open VXX and UVXY positions:
- The clustering of BSAs. Four periods from 1999 to 2021 in which a minimum of four BSAs were clustered within 6 to 11-week timeframes. For the 12-month periods after the clusters occurred the S&P 500 either declined or flatlined. Read “High Risk, Low Reward for S&P 500 for Foreseeable Future” article about the clustering if you have not already done so.
- That the optimum number of weeks for the initial BSA or the last BSA in a multiple BSA trading period is six weeks instead of five. Due to this discovery and based on the last BSA which has occurred the date for the S&P 500 to have begun its correction by has been extended to April 1, 2021.
The charts below depict the VIX for the three Clustered BSA periods from 1999 to 2018.
The chart below contains the chart patterns for the VIX, VXX and UVXY for the Bull Vix’s post BSA trading period which began on December 3, 2020, which has been extended to April 1, 2021.
The chart below depicts the performance of the VIX, VXX and UVXY from January 2, 2020, through February 22, 2021. Note that a lone BSA occurred on January 23, 2020.
The bottom line is that the level of bullishness can-not be sustained. Today’s Technically Speaking: Blowing Up The “Everything Bubble” is a great read.