JP Morgan VIX Buy Signal For ThinkOrSwim

[AndrewPnF]

Author states: The VIX (Cboe Volatility Index) is a widely-followed measure of stock market volatility.

JPMorgan strategists, led by Mislav Matejka, have developed an indicator based on the VIX that could be used to trade the markets more effectively.

The concept is simple:

A buy signal is generated when the VIX increases by more than 50% of its 1-month moving average.

The VIX Buy Signal indicator has been triggered more than 21 times during the past 30 years.

Every single time, the S&P 500 Index increased by an average of 9% over the ensuing six months.

Thought I'd share. On a different thinkscript resource they discussed this VIX strategy that was "100%" accurate at the time. I don't know if it's still true but....

https://thinkscript101.com/vix-buy-signal-indicator-for-thinkorswim/

It did look interesting though. So I added it to my custom indicators and then modified it a bit to show up on my charts. I copied the bubble structure from the Highest Volume of the Year indicator by XeoNoX via usethinkscript.com and added the fabulous Bubble Mover code. It does look like a very good way to show when the VIX hits inflection.

####
# Indicator Name: JPMorgan’s VIX Buy Signal
# Description: A bullish indicator from JPMorgan strategists
# Version: 1.0.0
# Developer: Melvin C.
# URL: https://thinkscript101.com/vix-buy-signal-indicator-for-thinkorswim/
####
 
declare lower;
def vix_data = close("VIX");
plot vix_average = (vix_data / average(vix_data, 30));
plot signal_line = 1.5;
vix_average.SetPaintingStrategy(PaintingStrategy.HISTOGRAM);

# END original VIX_JPMorganBuySignal_Lower code

# below is Stuff I added to to show bubbles and labels (if desired) and to allow user to ONLY show the histogram lines if the condition is met by making ONLY vix_average2 show and marking the rest to no show in the settings.  I'm not an expert thinkscript coder so most of this is cobbled together from other snippets of code I copied and pasted and then manipulated.

def vix_average1 = (if vix_average > 1.5 then vix_average else 0);
plot vix_average2 = (vix_average1 );
addlabel(yes,if vix_average >= signal_line then "JPMorgan VixBuy" else "",color.black);
vix_average2.SetPaintingStrategy(PaintingStrategy.HISTOGRAM);

input labels = yes;
def VixBubble = vix_average >= signal_line;
def yearhighvol = HighestAll(if GetLastYear() == GetYear() and !IsNaN(close) and !IsNaN(close[-1]) then VixBubble else 0);

def himonth = if VixBubble==1 then getmonth() else himonth[1];
def hiday =   if VixBubble==1 then getDayOfMonth(getYYYYMMDD()) else hiday[1];
def hiyear  = if VixBubble==1 then getyear() else hiyear[1];

AddLabel (labels, "VIX_JPM BuySig : " + himonth + "/" + hiday + "/" + hiyear, Color.black);

def BubbleHighest = VixBubble==yearhighvol;
input bubblemoversideways = -1;
def b  = bubblemoversideways;
def b1 = b + 1;
input bubblemoverupdown   = 0.50;

AddChartBubble(BubbleHighest ,VixBubble * bubblemoverupdown, "JPM " +himonth+" " + hiday,  Color.YELLOW, yes);

 

[PonchoMike]

This is similar to a strategy a friend taught me about ten years ago.

His stategy is to apply a 10 day simple moving average to the VIX. An alert is sent when the VIX exceeds the 10 SMA by at least 8 points. Once you get the alert, you watch the VIX. The indices are considered a buy once the VIX reverses and begins moving down. He preferred to wait for the VIX to drop below the 10 SMA.

There was a website that created a very interesting buy signal that worked similarly. I tried but could never duplicate it. If I can dig up the link, I may post it in the questions section.

 

[rlohmeyer]

@AndrewPnF

Very nice. Image below shows it overlaid on my volume study of the SPY.

 

[Thinker]

@AndrewPnF

Very nice. Image below shows it overlaid on my volume study of the SPY.
View attachment 23514

Your chart looks very interesting. Would you mind sharing it?

 

[rlohmeyer]

@Thinker
Link for charts and studies below:
Spy and studies: https://tos.mx/!iwrp62bE
[mod note] MUST follow these instructions for loading shared links.

Regards,
Bob

 

[Dharmakaya]

@AndrewPnF

Very nice. Image below shows it overlaid on my volume study of the SPY.
View attachment 23514

I like your volume study, and have seen similar in other places. How do we get multiple volume studies on one chart? I only have the basic volume profile. Thank you!

 

[Thinker]

Thank you for the shared link!

 

[rad14733]

I like your volume study, and have seen similar in other places. How do we get multiple volume studies on one chart? I only have the basic volume profile. Thank you!

The default setting "time per profile" is set to Chart by default but can be set to other timeframes as depicted in the image below... My example is from the VolumeProfile indicator that comes in TOS... You also need to change the "on expansion" setting to No...

 

[enjoy2retire`]

@AndrewPnF

Very nice. Image below shows it overlaid on my volume study of the SPY.
View attachment 23514

Can you elaborate on how to read your chart? Thank you.

 

[rlohmeyer]

@Dharmakaya

In answer to your question, you overlay the studies in the same section and insure you are able to see them each by manipulating their position within the section.

 

[Focus]

Author states: The VIX (Cboe Volatility Index) is a widely-followed measure of stock market volatility.

JPMorgan strategists, led by Mislav Matejka, have developed an indicator based on the VIX that could be used to trade the markets more effectively.

The concept is simple:

The VIX Buy Signal indicator has been triggered more than 21 times during the past 30 years.

Every single time, the S&P 500 Index increased by an average of 9% over the ensuing six months.

Thought I'd share. On a different thinkscript resource they discussed this VIX strategy that was "100%" accurate at the time. I don't know if it's still true but....

https://thinkscript101.com/vix-buy-signal-indicator-for-thinkorswim/

It did look interesting though. So I added it to my custom indicators and then modified it a bit to show up on my charts. I copied the bubble structure from the Highest Volume of the Year indicator by XeoNoX via usethinkscript.com and added the fabulous Bubble Mover code. It does look like a very good way to show when the VIX hits inflection.

####
# Indicator Name: JPMorgan’s VIX Buy Signal
# Description: A bullish indicator from JPMorgan strategists
# Version: 1.0.0
# Developer: Melvin C.
# URL: https://thinkscript101.com/vix-buy-signal-indicator-for-thinkorswim/
####
 
declare lower;
def vix_data = close("VIX");
plot vix_average = (vix_data / average(vix_data, 30));
plot signal_line = 1.5;
vix_average.SetPaintingStrategy(PaintingStrategy.HISTOGRAM);

# END original VIX_JPMorganBuySignal_Lower code

# below is Stuff I added to to show bubbles and labels (if desired) and to allow user to ONLY show the histogram lines if the condition is met by making ONLY vix_average2 show and marking the rest to no show in the settings.  I'm not an expert thinkscript coder so most of this is cobbled together from other snippets of code I copied and pasted and then manipulated.

def vix_average1 = (if vix_average > 1.5 then vix_average else 0);
plot vix_average2 = (vix_average1 );
addlabel(yes,if vix_average >= signal_line then "JPMorgan VixBuy" else "",color.black);
vix_average2.SetPaintingStrategy(PaintingStrategy.HISTOGRAM);

input labels = yes;
def VixBubble = vix_average >= signal_line;
def yearhighvol = HighestAll(if GetLastYear() == GetYear() and !IsNaN(close) and !IsNaN(close[-1]) then VixBubble else 0);

def himonth = if VixBubble==1 then getmonth() else himonth[1];
def hiday =   if VixBubble==1 then getDayOfMonth(getYYYYMMDD()) else hiday[1];
def hiyear  = if VixBubble==1 then getyear() else hiyear[1];

AddLabel (labels, "VIX_JPM BuySig : " + himonth + "/" + hiday + "/" + hiyear, Color.black);

def BubbleHighest = VixBubble==yearhighvol;
input bubblemoversideways = -1;
def b  = bubblemoversideways;
def b1 = b + 1;
input bubblemoverupdown   = 0.50;

AddChartBubble(BubbleHighest ,VixBubble * bubblemoverupdown, "JPM " +himonth+" " + hiday,  Color.YELLOW, yes);

Can you add an alert?

 

[PonchoMike]

Along similar lines tothe original post, there was an online conference recently where Erin Swenlin presented "Identifying Key Market Pivot Points Using Climax analysis. She presented several ideas that some on here may find value. The video is on youtube.

One idea is to take the ratio between NYSE up volume and divide it by down volume. She takes the inverse of that and plots it on a chart. When that ratio exceeds key levels, it can signal a reversal. Her approach uses two separate charts. I took this approach and created one indicator and use it to apply arrows to price chart when the ratios exceed key levels. The key level values are adjustable. The key levels is a parameter, so you should be able to set alerts for when the VIX exceeds the key level threshold.

Swenlin also plots the inverse of the VIX and applies Bollinger Bands to it, and looks for periods when the VIX spikes outside the BBs. I plotted this in TOS. When the VIX exceeds the Bollinger Bands, it prints an arrow on the price chart. I found that you can reduce the number of signals by increasing the Bollinger Band setting on the VIX to something greater than 2.0. I just created these charts this weekend, so I'm still playing with them. A setting of 3.0 for the BBs reduces the number of signals significantly.

Here is the link to the video:

For full disclosure, I can barely write thinkscript code. If anybody wants these, let me know and I will post them.

 

[rlohmeyer]

@PonchoMike
Yes, please share your code for extreme volume days.

Regards,
Bob

 

[PonchoMike]

Here is the code for the extreme volume days:

I use the same study for top and bottom. I go into the settings and turn off the plot for the histogram and reference lines when I use it as a bottom study. I only use the up and down arrows when I use it as a top study.

I've seen where people on this board will make a different indicator for top and bottom studies. The code is the same but the painting and formatting is different. Is it more efficient to do that than have one study used both top and bottom?

# This thinkscript can be used as both an upper and lower study.
# For lower study, turn off the Upsignal and Downsignal in the settings window.  This
# will only plot the histogram.

# For upper studies, turn off the NYSE_Up_Ratio and NYSE_Down_ratio in the
# studies window.  Turn on the extreme_up and extreme_down arrows.

# The green up bars are the ratio of the NYSE up volume divided by NYSE down volume.
# The red lines are the ratio of the NYSE down volume divided by the NYSE up volume.
# When up volume is very high compared to down volume, markets are seeing extreme optimism.
# When the down volume ratio is very high, markets are extremely pessimistic.
# The refline is an arbitrary value.  The minimum value is set at 3,
# but fewer signals are triggered at higher levels.

input refline_up = 3;
input refline_down = -3;
def ADV = close(Symbol = "$UVOL", Period = "DAY");
#//Count of Unchanged Issues
def DEC = close(Symbol = "$DVOL", Period = "DAY");

plot NYSE_Up_ratio = ADV / DEC;
plot NYSE_down_ratio = - DEC / ADV;



plot extreme_up = refline_up;
plot extreme_down = refline_down;

# This next section of code plots the up and down signals on the price chart.

plot UpSignal = NYSE_Up_ratio crosses above refline_up;
plot DownSignal = NYSE_down_ratio crosses below refline_down;

NYSE_Up_ratio.SetPaintingStrategy(PaintingStrategy.HISTOGRAM);
NYSE_Up_ratio.SetLineWeight(5);
NYSE_Up_ratio.SetDefaultColor(Color.DARK_GREEN);
NYSE_down_ratio.SetPaintingStrategy(PaintingStrategy.HISTOGRAM);
NYSE_down_ratio.SetLineWeight(5);
NYSE_down_ratio.SetDefaultColor(Color.RED);


Upsignal.SetPaintingStrategy(PaintingStrategy.BOOLEAN_ARROW_DOWN);
Upsignal.SetDefaultColor(color.RED) ;
Upsignal.SetLineWeight(3);
DownSignal.SetPaintingStrategy(PaintingStrategy.BOOLEAN_ARROW_UP);
DownSignal.SetDefaultColor(color.DARK_GREEN) ;
DownSignal.SetLineWeight(3);