DISCLAIMER

PLEASE READ THE DISCLAIMER AT THE BOTTOM OF THIS PAGE WHICH APPLIES TO ALL CONTENT IN THIS BLOG AS WELL AS ANY OTHER MATERIAL FROM WE ARE FUTURES TRADERS LLC. READING ANY CONTENT BELOW CONSTITUTES AN AGREEMENT BY ALL READERS THAT THEY HAVE READ AND AGREE TO ALL THAT IS SET FORTH IN THE DISCLAIMER AT THE BOTTOM OF THIS PAGE.


Thursday, March 04, 2010

Hiatus Just Unavoidable

I just simply cannot avoid missing a few days here right now, with all of my animal problems I barely even have time to trade. I spent the whole day yesterdays in vets offices for different things. I will do the best I can to continue to put things up daily but may miss a few days. The good news is I have not missed much. Alot of markets are chopping sideways in narrow ranges. Maybe tomorrows NFP report will break a few things loose. We are right into a sell zone right now for Stocks and I will demonstrate why I think that below.


Of all the different angles to examine stock price movement that I have studied over the years, the VIX in my opinion is the best individual tool to use. Just like anything else, alot of people now watch this so how to best use it is a constantly changing project. I like to run indicators on it just like it is an individual commodity or stock. It also can be traded as such, so if you desire you can trade this just like anything else.

The overall idea here is that since this is a volatility measure, it in general it will trade opposite of stocks. Of course like anything else there are exceptions, but that is the general view, buys here are sells in stocks and vice versa. If you look to the far left of the screen, you see a situation similar to what we have today. The green line overlayed on the chart is the SP 500. You can see the last time we had this setup, a decline marked by the red arrow occurred. What we had at this prior time was the RSI of the Vix showing a very oversold condition, which was also accompanied by the momentum oscillator in the next pane crossing it's trendline. Both of of these are buy signals, sells in stocks. We were also at that time right at the deviation bands meaning that a reversion to the mean should occur with pretty high probability.

As you can see the VIX did go up sharply, and stocks declined. Now forward to today and we see literally the identical situation. The only negative for this that I can see, is we now have light volume again, and an obvious overnight PPT move that saved a rollover last night. This is always the challenge nowadays is on sell signals you are often trading against the US government. As I have stated before, when volume is light it is very hard to trade against the PPT. When we get heavier volume they can be overpowered. These heavy volume days so seem to come out of the blue but they generally happen when 10, 14, 20 day lows get taken out. Funds often buy and sell at these places, so volume can show up quickly when these price areas get penetrated.

I am looking for sells right now as long as this setup remains. Will the PPT steamroll me, perhaps! This does also occur at a time that I have often previously stated on a bigger picture basis, where long term down cycles are about here. This could be a big move down if it gets started due to the convergence of both a short term sell signal, and a longer term one together.

5 comments:

Robert Campbell said...

Chris,

Are you still bearish on gold?

GLD broke above it's recent pattern of lower highs and lower lows when it traded at 111.

Chris Johnston said...

I do not really have a good feel in the short term either way in GOLD. It will follow stocks wherever they go just as it has for so long now. Bigger picture, it would seem likely that a much larger correction should occur from such a large commercial short and record small spec long. We have not had much short covering yet. There has been some but not enough yet to get me really bullish, so overall I would say nuetral here on the metals. This is why I have not covered them much lately.

My suggestion would be just to look for it to follow the stock market, it does it on almost a tick by tick basis most days if you want intraday trading.

robert said...

Hey, good job taking care of those neglected Saint Bernard dogs.

I can't stand to listen to stories or watch movies of kids and/or animals that are mistreated by those who should be caring for them.

+1,000 Chris.

forex-cat said...

nice analysis!!
Thank you.

...(I'd be pleased if you exchange reciprocal link with me.)

Chris Johnston said...

If you mean a link on your blog to me and vice versa, you will have to send me a link. I will check out your blog or site and if I think it is something that makes sense to be linked to from me I would have no problem with that.

mktwzrd1@gmail.com is my email, send the link there and I will check it out