timwest

SPY action AFTER VIX rises by 5 points

BATS:SPY   SPDR S&P 500 ETF
1232 18 2
VIX             5 POINT RALLIES:

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
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timwest PRO
4 years ago
IF you wait for a SIGNAL of 5 points advance in the VIX AND THEN wait for the range of trading to contract (using True Range) and risk the size of that range then you will see you get much better ENTRY PRICES AND MUCH MORE UPSIDE. The risk drops to 1 point from over 3 points, on average. And the entry price is roughly 1 point LOWER. It makes the winners 30% bigger and the losers 60% smaller.

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.
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gogg
4 years ago
LOL!
snapshot
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timwest PRO
4 years ago
VIX has fallen 0.10 shy of 5 points off the recent peak. That is, most likely, the best exit strategy for this kind of signal. Cheers.
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charttrader PRO timwest
4 years ago
Thanks you for the update.
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timwest PRO charttrader
4 years ago
It's certainly important to look at VIX as a general gauge of sentiment, however, it takes a lot of wisdom to interpret what it is telling us. If VIX falls, it can be a sign that people are selling calls out of fear of high prices, which of course is bullish. If VIX rises, it can mean that people are buying put protection and hedging their long positions, which is also bullish, of course. So, within the context of taking positions opposite to the crowd just as they lose momentum in that direction, we can often enter the market at just the right time where we don't take much risk and have plenty of upside potential in our trades.
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charttrader PRO timwest
4 years ago
This makes sense Tim. What is your opinion regarding SPY at current moment? You posted about it a while ago
SPY 9 Years of 50 day vs 200 day moving average crosses
. Thanks.
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tarun766
4 years ago
Could you continue this idea? I an new here and would much appreciate it.
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timwest PRO tarun766
4 years ago
I was going to publish that last week when the signal triggered again. I'm glad you are paying attention. We are all hunkering down here for the storm, wondering how this storm will play out. Thanks for sending me a message.
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tarun766 timwest
4 years ago
Ye heard New York got hit pretty bad. i'm looking forward to a trading day tomorrow! I play the VXX and the XIV off the RSI(2) signal, when the RSI is below 10 I enter and exit when it is above 50.
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