"Vixenator II" or how to turn "risk" into "opportunity"

What happens when "risk" is turned into a mimetic poly-alloy? We get Vixenator II and "risk" turns into "opportunity"! While working on a risk ratio, a statistical approach towards VIX and SPX turned out to be rather promissing.

SPX weekly chart
Back in January a statistical framework was provided for DMI, MACD and RSI. For creating Vixenator II the same approach is used. For the sake of brevity please consult the mentioned posting for the theoretical background.

Bell curve of "normal distribution"
By design Vixenator (I) was limited to daily charts. For the sequel a new composition is used resulting in an indicator way more mouldable than its predecessor: because of its "liquid elements" Vixenator II allows for application on all timeframes.

SPX daily chart
SPX 3 minute chart
Without all the code for "look & feel" the construction of Vixenator II comes down to this:
def  ratio    = VIX / SPX;
def  sma     = Average(ratio, length);
def  sd        = StDev(ratio, length);
def  diff      = ratio - sma;
plot zscore  = -1 * diff / sd;
On account of the values yielded by this formula and bearing the statistical concept of "normal distribution" in mind one is capable of a making a probabilistic statement on the direction of the indicator and thus of the instrument it is measuring (see January posting). Moreover, based on Vixenator II's historical behavior propositions for "long", "short" and "neutral" stances can be taken.:
A "long" position is proposed when zscore >= +1 (sd) or with an upward move of zscore of at least 1 sd into positive territory. "Long" is exited when the indicator starts reading negative values.
A "short" position is proposed when zscore <= -1 (sd) or with a downward move of zscore of at least (-)1 sd into negative territory. "Short" is exited when the indicator starts reading positive values.
When not "long" or "short" a "neutral" stance is proposed (indicated by the yellow coloring).
The mentioned "1" sd value is the default trigger level. Adjusting to "0" basically renders the outcome to "stop and reverse" signals.

SPX daily chart
SPX 3 minute chart
Besides the "long", "short" and "neutral" coloring, the indicator allows for the detection of trend line breaks (see chart above) and divergence detection (not shown).

Feel free to comment or make suggestions and please do consider a donation: also $5 or $10 gifts are by all means a welcome encouragement!

Like always the thinkscript code is available for copy/paste in the comment section. Nobody wants to wait for a sequel for 7 years! Enjoy it now!