Reality Check

A trader argued a falling VIX beta is no reason to be long vol, just an entrenched calm regime you pay carry to fight. Across 36 years, the data backs him up.

VIX bounces from almost everywhere, so a line drawn anywhere looks like it works. Once you control for the VIX level, the trendline adds nothing.

We set out to test whether a beaten-down VIX warns of a spike. In 22 years its RSI dropped below 30 only five times. VIX is structurally almost never oversold.

We tested every cross above the 10, 20, 50, and 200-day lines, and being above them, over 22 years. The crosses lag, and being above the average just means VIX is already elevated.

The textbook fragility gauge has a weak tilt, but it stayed quiet before the two unwinds that mattered most.

The bigger the one-day surge in VIX's RSI, the more VIX faded afterward. The signal fires at the spike, not before it.

We tested the 17-20 and 20-25 zones over 22 years. One looks harmless, one looks scary, and neither gives you a real edge.

It looks like it warned you before every big spike. We tested all 138 of them over 22 years against a plain baseline, and the forward odds match a random day.

BOIL melts and winter is its worst season, so the short wins most years. The catch is the one winter in seven that can take the whole account.

Across 26 corrections since 1950, the deepest S&P declines did not start from overbought peaks. They started from ordinary momentum. The blow-off tops were the shallow ones.

DSPX measures expected stock dispersion. Across twelve years it gives no edge on the market direction and no advance warning of a crash. It is a correlation gauge, not a fear gauge.

On the S&P 500, buying at RSI 30 is a real edge. On single stocks it is a coin flip, and on the best stock of the decade it lost money. Oversold means opposite things on an index and a stock.

By the time the death cross fires, VIX is already at its 84th percentile and the fear is in the tape. Then it fades, and the famous doom signal was followed by the S&P rising 80% of the time.

Natural gas is the most mean-reverting commodity, and the 50/200 cross is a trend tool. Across 42 crosses since 2000 the golden cross bought the top (down 5% the next month) and the death cross often marked the bottom.

The SKEW index is sold as a crash gauge. Over 36 years higher SKEW meant slightly fewer crashes, it sat below its median before the average crash, and 90% of its loudest warnings were false alarms.

UVXY decays to a new low almost every week, so held long enough every short wins. We shorted every 50% spike since 2011: a 100% win rate, and an account wiped to zero by one spike.

Traders treat a VIX9D jump while VIX stays calm as an early warning. Across 3,876 days since 2011 the two move together 93% of the time, and when VIX9D outran VIX the 30-day gauge fell, not rose.

X is the fastest information source a trader has, and a magnet for accounts that look useful and are not. Ten kinds to mute, from breakout callers to macro doomers, and the tricks they use to fake a track record.