But before introducing the Vixenator, I'd like to thank all my visitors for 50,000+ pageviews and their continuous support!
The original indicator was scripted some 4 years ago by "Osikani" and it compares the value of the VIX to the Implied Volatility of the SPX. What is Implied Volatility (IV)? In TOS speach:
As "Osikani" put it: "Put it on a daily chart (the only chart on which it will plot), and see how it calls the market direction quite well: VIX above IV of SPX is a falling market; and the converse."
Implied volatility is an estimate of the volatility of the underlying stock that is derived from the market value of an option. Implied volatility is the volatility number that, if plugged into a theoretical pricing model along with all the other inputs, would yield a theoretical value of an option equal to the market price of the same option.
Because indicators like TRIN, CPCE, VIX force me to think "Kiwi", I inverted the indicator and normalized it at the IV value. Normalizing VIX on the IV adds the supplementary benefit of showing divergences. Besides I've added dots on the IV (= zero) line indicating the waning (blue) or waxing (red) of IV. So Vixenator calls for a rising market when above the zero line while IV is waning. A falling market is indicated when the indicator paints subzero values while IV is waxing. To conclude, price bar coloring is offered too (default is: yes/on).
As always, the thinkscript for Vixenator is available in the comment section.
"Hasta la vista, baby."
