Thursday, January 12, 2012

TVIX: The Sentimental Dinosaur - RSI and P/C Data

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 (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  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?


  1. Great stuff as usual John. Glad to have you back blogging more. /ES just seems like it won't drop. Getting tired of waiting lol..

  2. gold miner:Thanks a lot John.I was looking to play Vix index,and I think that TVIX is a right thing to play,even if it may go down another 10%.So I am in at the close of the market.So let,s hope the beast wakes up sooner than later.Much less risk than DUST.

  3. Thanks John! ES will necessarily fall... Wait Mike

  4. Hi John I have recently started following your blog and your posts, great stuff here btw, thanks so much for this. I have started to use the TSI, I use Think or Swim and I'm curious what parameters you have your TSI setup with? Fast length 7, slow length 4, SMA/EMA? Thanks for a response.

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  6. hey john, great analysis. Where would you presume TVIX goes from here?

  7. Very happy to see your TVIX post as I took a small position yesterday. I may be a little early. I followed this T-Rex for a while and it sure can take off in either direction.

    How do you feel currently about CDY?

    Thanks so much!!!


  8. Mavrich - is that a serious question?

    Aaron - CDY and all the miners will come under pressure as the stock market completes this daily cycle.
    I imagine this will take most if not all of next week to complete.

    Warren - I know I answered your question with an email response, but for anyone else, I use TSI (7,4) always
    which, btw, is the same as TSI (4,7). And I only put a moving average on for visualization but do not use
    it for trading, though one could, of course.

  9. hi john, DUST has made a nice jump below zero line on daily chart... does it have room to run further up ?

  10. DUST - is just about to give a trend line break BUY signal on its daily chart TSI (7,4)
    and has an 'unusual' DOUBLE positive divergence BUY signal on its 4 hour chart TSI (7,4).
    Not sure what your trading time frame is, but generally speaking I am of the opinion DUST
    is just getting started - as opposed to being nearly done. A day or two of dancing around
    may be in store but my guess is that by the end of next week DUST will be sharply higher.

  11. Hi John, great post on TVIX.

    As it happens I did some coding to be able to superimpose a stock, index or what do you have, on a pricechart in TOS. I added the option to superimpose inverted, especially for VIX (and his offspring, I would love to have CPC too in TOS). I'll send you the chart by email. It demonstrates perfectly why the [T]VIX is a beautiful fear/complacency meter. If you like you can post it, or you can make your own. The study.ts file is available for download on my site.

    Have fun with it!

  12. Aloha John,

    "Shouldn't be much Longer" when TVIX was trading around 24. My interest awaken to this new ETF. Today, I open a position at 16.10. Now, how much lower will it go before it pops to the upside. Can you re-visit TVIX with any additional comments. This is not a Buy and Hold position?

  13. Now that it's at 14.60 I'm wondering as well lol. How much lower can it go type of thinking.. I know that can get people in trouble. Been waiting for the SPX to pop. Seems like it should retrace some now and might be a good time to consider some TVIX?