Tuesday, August 14, 2012

Mon, Aug 13: VIX, VXN, S, VOD

Major contrarian signal alert: after a pummeling today, the major options pricing -based market volatility indices are at record lows. A 5-year chart of the VIX, the CBOE volatility index based on options pricing for stocks of the S&P500 index, reveals that today's close of 13.7 is only a whisker above the 5-year low, set in March of this year (at the market top, needless to say).

VIX. August 2008 to present. Daily candles.

One of the less-discussed cousins of the VIX, the VXN, itself based on options pricing for stocks of the NASDAQ-100 index, today set an outright new 5-year low. Market technicians often interpret the VIX and its derivatives as contrarian indicators, meaning that the present low levels in these instruments add evidence to the hypothesis of forthcoming bearishness for equities.

VXN. August 2008 to present. Daily candles.

Among interesting charts of equities are those of Sprint Nextel Corp (S) and Vodafone (VOD). Coincidentally, both companies are, of course, telecoms; both are also members of the NASDAQ-100. As suggested by the above chart of the VXN, the proxy measure of anticipated NASDAQ-100 volatility, both S and VOD are rallying. S, notably, is in a steep and relatively high-volume bullish spike. A nearly three-year price channel suggests potential resistance just below $5.50.

S. August 2008 to present. Daily candles.

Vodafone, meanwhile, has exhibited a curious relationship between its open and close prices over the last month. Over the last 24 trading days, the open has been below the close on only 3 occasions. Moreover, on only one occasion has the close been more than 10 cents below the open. Notably, VOD is an ADR (American depositary receipt) type of equity; its primary listing is on the London Stock Exchange (LSE), and as such, the American ADR experiences many gap days, given that LSE trading of Vodafone shares starts several hours before New York price action commences. Against the backdrop of the Eurozone crisis (which has had its share of headlines over the last month), perhaps the trend is for European pessimism to yield to American optimism?

VOD. Jul 11, 2012 to present. Daily candles.