VXO GRUMBLINGS

There has been a lot of chatter lately about the low readings on the Volatility indexes. The above chart of the VXO, which is the original VIX based on the OEX 100 index is now quite oversold. It is about 8.5% below its 10 day SMA and with any further lift in the major market indexes will no doubt issue a sell signal of 10% below its 10 day SMA.

The answers as to why the Volatility Sisters are so low runs from too many hedge funds chasing too little opportunity to the market is just fairly valued. I do not know why the indexes can't lift on selloffs but I do know that buying when the indexes are overbought (110% or more above the 10 day SMA) and selling when oversold (below 90% of 10 day SMA) has led to consistent profits and I intend to stay the course and follow the signals.