VIX Statistical Sentiment Index [Nasan]
** THIS IS ONLY FOR US STOCK MARKET**
The indicator analyzes market sentiment by computing the Rate of Change (ROC) for the VIX and S&P 500, visualizing the data as histograms with conditional coloring. It measures the correlation between the VIX, the specific stock, and the S&P 500, displaying the results on the chart. The reliability measure combines these correlations, offering an overall assessment of data robustness. One can use this information to gauge the inverse relationship between VIX and S&P 500, the alignment of the specific stock with the market, and the overall reliability of the correlations for informed decision-making based on the inverse relationship of VIX and price movement.
**WHEN THE VIX ROC IS ABOVE ZERO (RED COLOR) AND RASING ONE CAN EXPECT THE PRICE TO MOVE DOWNWARDS, WHEN THE VIX ROC IS BELOW ZERO (GREEN)AND DECREASING ONE CAN EXPECT THE PRICE TO MOVE UPWARDS"
Understanding the VIX Concept:
The VIX, or Volatility Index, is a widely used indicator in finance that measures the market's expectation of volatility over the next 30 days. Here are key points about the VIX:
Fear Gauge:
Often referred to as the "fear gauge," the VIX tends to rise during periods of market uncertainty or fear and fall during calmer market conditions.
Inverse Relationship with Market:
The VIX typically has an inverse relationship with the stock market. When the stock market experiences a sell-off, the VIX tends to rise, indicating increased expected volatility.
Implied Volatility:
The VIX is derived from the prices of options on the S&P 500. It represents the market's expectations for future volatility and is often referred to as "implied volatility."
Contrarian Indicator:
Extremely high VIX levels may indicate oversold conditions, suggesting a potential market rebound. Conversely, very low VIX levels may signal complacency and a potential reversal.
VIX vs. SPX Correlation:
This correlation measures the strength and direction of the relationship between the VIX (Volatility Index) and the S&P 500 (SPX).
A negative correlation indicates an inverse relationship. When the VIX goes up, the SPX tends to go down, and vice versa.
The correlation value closer to -1 suggests a stronger inverse relationship between VIX and SPX.
Stock vs. SPX Correlation:
This correlation measures the strength and direction of the relationship between the closing price of the stock (retrieved using src1) and the S&P 500 (SPX).
This correlation helps assess how closely the stock's price movements align with the broader market represented by the S&P 500.
A positive correlation suggests that the stock tends to move in the same direction as the S&P 500, while a negative correlation indicates an opposite movement.
Reliability Measure:
Combines the squared values of the VIX vs. SPX and Stock vs. SPX correlations and takes the square root to create a reliability measure.
This measure provides an overall assessment of how reliable the correlation information is in guiding decision-making.
Interpretation:
A higher reliability measure implies that the correlations between VIX and SPX, as well as between the stock and SPX, are more robust and consistent.
One can use this reliability measure to gauge the confidence they can place in the correlations when making decisions about the specific stock based on VIX data and its correlation with the broader market.
The indicator analyzes market sentiment by computing the Rate of Change (ROC) for the VIX and S&P 500, visualizing the data as histograms with conditional coloring. It measures the correlation between the VIX, the specific stock, and the S&P 500, displaying the results on the chart. The reliability measure combines these correlations, offering an overall assessment of data robustness. One can use this information to gauge the inverse relationship between VIX and S&P 500, the alignment of the specific stock with the market, and the overall reliability of the correlations for informed decision-making based on the inverse relationship of VIX and price movement.
**WHEN THE VIX ROC IS ABOVE ZERO (RED COLOR) AND RASING ONE CAN EXPECT THE PRICE TO MOVE DOWNWARDS, WHEN THE VIX ROC IS BELOW ZERO (GREEN)AND DECREASING ONE CAN EXPECT THE PRICE TO MOVE UPWARDS"
Understanding the VIX Concept:
The VIX, or Volatility Index, is a widely used indicator in finance that measures the market's expectation of volatility over the next 30 days. Here are key points about the VIX:
Fear Gauge:
Often referred to as the "fear gauge," the VIX tends to rise during periods of market uncertainty or fear and fall during calmer market conditions.
Inverse Relationship with Market:
The VIX typically has an inverse relationship with the stock market. When the stock market experiences a sell-off, the VIX tends to rise, indicating increased expected volatility.
Implied Volatility:
The VIX is derived from the prices of options on the S&P 500. It represents the market's expectations for future volatility and is often referred to as "implied volatility."
Contrarian Indicator:
Extremely high VIX levels may indicate oversold conditions, suggesting a potential market rebound. Conversely, very low VIX levels may signal complacency and a potential reversal.
VIX vs. SPX Correlation:
This correlation measures the strength and direction of the relationship between the VIX (Volatility Index) and the S&P 500 (SPX).
A negative correlation indicates an inverse relationship. When the VIX goes up, the SPX tends to go down, and vice versa.
The correlation value closer to -1 suggests a stronger inverse relationship between VIX and SPX.
Stock vs. SPX Correlation:
This correlation measures the strength and direction of the relationship between the closing price of the stock (retrieved using src1) and the S&P 500 (SPX).
This correlation helps assess how closely the stock's price movements align with the broader market represented by the S&P 500.
A positive correlation suggests that the stock tends to move in the same direction as the S&P 500, while a negative correlation indicates an opposite movement.
Reliability Measure:
Combines the squared values of the VIX vs. SPX and Stock vs. SPX correlations and takes the square root to create a reliability measure.
This measure provides an overall assessment of how reliable the correlation information is in guiding decision-making.
Interpretation:
A higher reliability measure implies that the correlations between VIX and SPX, as well as between the stock and SPX, are more robust and consistent.
One can use this reliability measure to gauge the confidence they can place in the correlations when making decisions about the specific stock based on VIX data and its correlation with the broader market.
Notes de version:
made minor update on how reliability is calculated.
Notes de version:
Added Reliability Measure to the status line.
Notes de version:
updated Reliability calculation, when VIX vs SPX is not inversely proportional the reliability is not calculated and is set to return n/a.
Notes de version:
minor update