An Awesome Sight
As important, if not more so, than having the
right strategies, is the patience and discipline to execute them at the
opportune
time.
Using Friday’s closing data, there were four
Connors VIX Reversal (CVR) alerts on the Market Bias Page. You can see for
yourself the status of the other indicators which, all told, gave us a total
of six alerts with a upward directional bias. While no one can say for sure
that we’ll see substantial follow-through, this setup does appear to have some
of the ingredients we like to see.
If you’re having an episode of deja vu right
now, you are probably thinking of that day on Thursday,
December 21, 2000, when we had four CVR signals with an “up” bias. The
day after this, you saw the NDX 100 (NDX) +9.5%, the S&P 500 (SPX) +2.4%,
and the Dow (INDU) up 1.4%. From there, the market eventually made its way up
to the January 24, 2001 high.Â
It pays to follow this set of
indicators on the Market Bias Page religiously.Â
Each of the these indicators is
designed to identify extremes in the Market Volatility Index, which
historically have had a greater than 60% or higher correlation with market
turns. The best way to use the Market Bias Page is to watch for multiple
indicators to all be triggered at once. The likelihood of a turn is greater on
a day when you see two or more Market Bias indicators alerting you of the same
directional bias.Â
Let’s let’s look at more of a
raw perspective using an overlay that combines both the VIX and the Nasdaq.
Correlations like this are always easy to see
in hindsight. Many traders have quite rightly pointed out that you cannot get
reliable results using the VIX as an overbought/oversold indicator. In other
words, you cannot accurately time the market using the raw extremes in the VIX.Â
The
CVR Signals address this. Still, the chart is rather an
awesome sight and if a sustainable rally comes off the multiple signals we
just got, then it’s going to be yet another reason for you to never, ever
again neglect to check the Market Bias Page on a daily basis.
If you think this is nice–not more than
an hour ago, Larry Connors informed me that he will soon be releasing the
results of 3 1/2 years of new VIX research. The market timing alerts generated
from the new research will surpass anything he’s done in he past.
Until Tuesday,
Eddie