Tuesday, January 9, 2018

XIV - Reversion to the Mean

Mean reversion is the theory suggesting that prices and returns eventually move back toward the mean or average.

XIV has overheated and a reversion to the mean is likely in the months ahead. 

When prices become this stretched from the normal, the move tends to be quite violent with a panic decline.

2day Chart

This model shows similarity to XIV.  Notice the sudden drop with no warning, and continuation lower:

Not much room for downside on this chart for UVXY.  Price slowly grinding along support with time.  Spike up likely within a few weeks.

2day Chart