I am graphing what the SPY does AFTER the VIX goes up by 5 points from a low. These are the last five signals.
After VIX rallies by 5 points, I have placed green arrows at the close of that day. Theoretically, buy the SPY and see what happens. The market has more upside potential than downside risk, in theory, from this condition. The chart above shows graphically how much upside movement (GREEN BOX) versus downside movement (BLUE BOX) is seen in the market after VIX rises by 5 points.
The first signal was decent on April 9th.
The second signal was a disaster May 8th.
The third signal was ok on May 31.
The fourth signal was great on June 13.
The fifth signal was very good on July 23.
The average advance is 3.5 points.
The average decline is 3.2 points.
VIX has now moved +5 pts intraday today, Sep 4.
Let's see what happens next.
Technical Tim 4:30PM EST Sep 4, 2012
The point of this concept is to wait for momentum to slow on the downside when you enter a buy signal from rising VIX readings.