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Technical Indicators as a leading indicators for implied volatility

The research objective is to prove that technicals can indeed predict volatility, using a market bottom pattern as an example. And then create an algorithm to identify the market bottoms, and statistically calculate the likelihood of a drop in volatility after the bottom is formed.

5 responses

Try to use the candle stick patterns and technical indicators to find a bottom, such as morning doji star, engulfing pattern, RSI, StochRSI, bollinger band... and combined some of the indicators.
None of them seems to be a good predictor of a bottom.

Check the VIX trend after a spy bottom.
There is a downward trend after a bottom, but not strong.

Here is the algorithm long XIV after a SPY bottom and sell it after a top.
The bottom is defined as the lowest close price after 10 days.

The bottom is defined as the lowest close price after 30 days.

Try another sell point using WVF.