A VIEW FROM AFAR
It is so easy to get caught up in death staring charts, I sure do. When we do this sometimes we get stuck in a trance and miss something that might be a telling sign that is flashing somewhere else. I have felt for quite some time that the VIX is the best tool to spot short term swing points in the Bernanke's even before Bernanke took over stock index trading. There are many many ways of using this, but they all essentially fall into the category of overbought/oversold. When Volatility is over extended in either direction in the VIX it tells us also that sentiment is in the same condition, and contra moves often happen.
The above chart just has basic Bollinger Bands on the VIX, nothing fancy, I just have the standard settings that are on it from Genesis, I don't even know what they are. All you have to do is look for closes that are outside of the bands, I have marked them off. Those below the bands are sells for the Indexes and those above are buys. It is that simple, and you can see how well this basic idea works. The Green Line is the closing price of the Bernanke 500. You can see for the most part that this basic idea works pretty well, or at least gives you an idea of what direction to be looking. You can take this to many other levels, so do your own research with it, the time will be well spent.
You have to always remember that there is no holy grail even though I constantly look for it. The longer I go at this the less I really expect to find it. All you need is an edge in your approach, then just execute it over and over knowing that over time you come out ahead. It is really that simple. Trading is most often just about grinding it out, it is not glamorous. I just often write in my trading journal one word, EXECUTE. I throw out alot of ideas here for readers to consider, and that is the whole purpose of why I go to the trouble of writing in here every day. It is up to you what you will with the subjects I discuss. More often than not there will be other better ways of using these tools than I present.
From where we sit now it is merely a formality to make new highs for the year, the bull market certainly appears to be off and running once again. I still have that weekly sell pattern there, but keep in mind that is merely a setup, it is not an entry. It just tells me that I can take sell signals on daily charts if they develop because they are backed up by something on a larger time frame, but they are still nowhere in sight. Also, I have no buys here since we are very extended on a short term basis. If you are long just tighten up stops underneath and enjoy the ride, there is no telling how far this will go. It may stop right here, it may go on for quite awhile. Tomorrow we get the insult of the doctored NFP report, which should be called the DNFP since it is obviously "Doctored" before it's release. It is likely to be a bad report, but as we have clearly seen, you cannot short term trade stocks based on economic fundamentals. They really other than short term snap reactions which last minutes, almost have no relationship at all.
I mentioned the other day I was looking for longs in the Grains, and they triggered last night so we will see what happens there. I do not watch things intraday that I am in, so I have no idea how those markets are doing as I post this, I will tune in later to see. I have also been looking to short Bonds and just can't quite pull the trigger there. One of my main tools is just so borderline, that it really is a wait versus go today, so I may miss that move. However, I follow my rules and by the rules it is just not there and I am not going to force the trade. I also passed on the longs in the Aussie due to what I perceived as too much divergence in the POIV indicator, so it appears I missed that one also. It is ok, if it were to fail and I had done it, the POIV would have been the first thing I would have looked at that told me what I did wrong. I always want my trades when I look back to have been obvious, if I think they won't be by one of my rules, when I look back at it a month afterwards, I don't take it.
I mention these not to make myself look like a fool, but just to admit the reality of trading. You are going to miss trades all the time. I am more concerned with what happens with the ones I do than the ones I do not. There is always a fish that gets away.