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
Comments
tarun766
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Could you continue this idea? I an new here and would much appreciate it.
timwest
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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.
tarun766
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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.
laimiskisielius
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Followed.
HinduMVP
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Followed.
StopPrintinMoney
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Followed.
danon7
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Followed.
timwest
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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.
charttrader
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Thanks you for the update.
timwest
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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.