Skew IndexThe SKEW index is a measure of potential risk in financial markets. Much like the VIX index, the SKEW index can be a proxy for investor sentiment and volatility. The Skew Index measures perceived tail-risk in the S&P 500.
SKEW values generally range from 100 to 150 where the higher the rating, the higher the perceived tail risk and chance of a black swan event. A SKEW rating of 100 means the perceived distribution of S&P 500 returns is normal and, therefore, the probability of an outlier return is small.
Skew Index is at the lower end of its risk-range. Market doesn't appear to be hedging any tail risk
Skew_vix
SKEW Indicator and NASDAQ - point of reversal interest?SKEW is probably a little less known in the world of volatility than for example the VIX, but essentially it is a measure of the implied volatility of OUT of the money options, as opposed to AT the money options on the market like the VIX.
I suppose it may be a better comparison to check SKEW vs the SPY, but I'm a NASDAQ guy so I wanted to have a look at this in particular.
Basically the lower the SKEW is, the lower the market's expectation that the market price will move MORE than 2 standard deviations from the current price.
It's difficult to ever draw perfect correlations or conclusions, however, it does seem that once the SKEW "looks like" and this is more of an opinion of how you think the chart of the SKEW looks, but when the SKEW looks like it's made at least an interim bottom and is reversing upwards, this seems to correlate with the market/NASDAQ getting at least an interim reversal. (some instances indicated by the vertical green lines)
Difficult to put into text this kind of idea, but kind of consider, if the SKEW is a measurement of the market's expectation to get a move from current price more than 2 standard deviations in the next month, then once the SKEW "bottoms out", it means that the market isn't really expecting a big move to happen in the next 30 days (this includes bearish and bullish moves btw); but when SKEW looks like it's made an interim bottom, and looks like its starting to creep back upwards, this is the point at which market sentiment is starting to shift slowly, showing as the SKEW moves back up that there is more and more expectation of a move in price more than 2 standard deviations from the current market price.
It's at this point (the point of looking like a reversal off of an interim bottom in the SKEW) that I think could correlate to at least interim bottoms in the market; because we're precisely at the point at which SKEW shows us the market doesn't think we're about to get a big bearish OR bullish movement in price; and the fact we're at the point which it's just starting to creep upward again; shows us that the market is expecting SOME movement in price; but if it were going to be a sharp correction of some kind you would see the SKEW at a much higher level already, not just reversing off of what looks like a bottom.
Again, correlation maybe, opinion maybe, trying to get a sense of how something like the SKEW communicates what the market itself is thinking.
Food for thought.
SKEW VIXThe SKEW Index imho is a usefull indicator but the index does not provide you any timing on when to sell or to buy. I always look at divergence and this time the divergence is massive. So the pro's are buying protection (SKEW) while Joe 6 pack keeps buying stocks and is filled with FOMO (VIX)....Why make it difficult for yourself and do as the pro's are doing ...Buy some protection or reduce position size.....
US Equity Markets Artificial LiftSKEW/VIX Indicator - OIL Volatility OVX
SKEW/VIX Index compare, is a new indicator that I built here on TradingView (you can read details how it was constructed in the related link below). When combining SKEW with VIX, we can see significant market tops/bottoms and displacement/divergence. As you can see in the chart, S&P has been in a tight upward channel since October, 2011. SKEW/VIX and Oil also marked a significant low in October, 2011. SKEW/VIX remained in upward trend from the low, and set many more highs until June 30 2014. It was in June, where Oil started it's panic selling, and eventually breaking the support stronghold held since the October 2011 low. From June 30, 2014 SKEW/VIX peak until now, both oil volatility index OVX and S&P volatility index VIX have risen significantly. With SKEW/VIX trending down toward a lower sub 5 level, I would call our S&P run since June 30th, an artificial lift. Eventually we will see a major correction.
VIX has been quietly trending upward. On this chart notice the higher lows.
Oil Volatility OVX has also increased volatility in the S&P and follows VIX closely.
