Monday, September 8, 2008

Panic Ratio (VIX/IRX)

another chapter from the Make It Up As You Go analyst handbuch.

the last few months I've been playing around with a simple ratio on stockcharts. the Volatility Index ($VIX) divided by the 3 Month Treasury Discount Rate ($IRX). this synergistic blend of two widely utilised indicators of mass hysteria I call the Panic Ratio, or its code name: XXX

the higher the ratio gets, the more panic prevailing in the marketplace. it seems well suited to analysis through yer usual technical tools such as oscillators, moving average crosses and what not. but today we'll just gasp at the majesty of this huge freakin triangle: