Volatility Model - (Beta) Model switches to SELL on November 17, 2015

Published : November 17 2015 at 10:50 ET

The VIX Volatility Model (VVM) has switched to a SELL. This means to buy inverse ETFs such as SVXY, XIV, and ZIV. 

Note, to avoid confusion, the signals are now in alignment with the VIX. When the VIX rises, the market usually falls, and vice-versa. Thus a BUY signal means to buy the VIX, meaning the model believes the market is heading lower. A SELL signal means to sell the VIX, meaning the model believes the market is heading higher. 

When the model is on a BUY signal, buy ETFs such as VXZ (0.5x), VIXY (1x), VXX (1x), TVIX (2X), UVXY (2X). The model thus believes the general markets will move lower thus volatility will increase.

When the model is on a SELL signal, Buy any of ZIV (less volatile apprx 0.5x), SVXY (1x), XIV (1x). The model thus believes the general markets will move higher thus volatility will decrease.

IMPORTANT: Dr. Kacher has incorporated fail safes into the model which substantially increases its risk/reward.

That said, some of the signals may be short-lived should their fail-safes hit, sometimes within an hour or less of the signal. That can result in more than one whipsaw within the same trading day. The signals that prove profitable, however, have been shown in backtests and more recently in real-time using actual capital to be significantly more profitable than the small fail-safe losses, even in a sideways market that has characterized much of this year. But always remember, past performance is no guarantee of future performance.

This model remains in beta for now, but once we get a number of signals that show profits with the fail-safes in place which are contextual to the emerging price patterns, the model will go live.

Note, calling the Volatility Model a "model" is misleading as the algorithm is self-learning thus ever evolving with ever-changing price patterns. The same can be said for the Market Direction Model though it is self-learning at a much slower pace as it is designed to catch the major trends.


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