I’m Not Going To Talk About The VIX

On Monday, the Nasdaq opened lower and bounced
around a bit. It then rallied but found its high mid-day and worked
its way lower for the remainder of the day. For the most part, it was
dull, summer, pre-holiday trading. 

Monday’s action puts the index back its 50-day
moving average.

 

The S&P rallied
to the top of its recent range but failed to break through. This
action keeps it in the 1200 to 1240 range.

 

It seems that some
are sick of hearing about a certain market indicator (more on this
below). Therefore, it shall remain nameless. Let’s just say that it
and another related indicator probed to levels not seen since
September of 2000.  

And, the five day
average of the advance minus the five day average of the declining
issues (A.K.A. The CHADTP) has now reached overbought levels.

So what do we do? Considering the above, it
appears that we are due for a sell-off. However, the tape still
remains slightly positive. Therefore, keep it light on the long side
and continue to look for shorting opportunities for when it does turn.

Human Genome Sciences (HGSI)
looks poised to break down out of an inverted cup and handle.

Northrop Grumman (NOC),
mentioned recently, still looks vulnerable.

For Those Who
Don’t Want To Hear About The VIX, Skim Down To “End Of Today’s
Discussion On The VIX” 

Is Discounting A Good Thing?

There’s an old saying that what everyone knows,
isn’t worth knowing. Therefore, because everyone knows the VIX is low,
it isn’t worth knowing? I’m not so sure. The fact that many are
discounting the VIX readings means something. Some of the reasons I’ve
heard lately, other than “everyone knows its low,” is the
fact that it’s “based on the OEX 100 and the OEX doesn’t mean
anything anymore, ” “its summertime” and so on and so
forth. Market “systems” work as long as people fight them.

Confessions Of A VIX User

I’m the first to admit the that VIX (or any
indicator for that matter) isn’t a be-all, do-all, perfect indicator.
In August of 2000, I remember preaching of low VIX readings. During
that period, I sat on my hands. I did not buy any stocks during
what later turned out to be the best month for the Nasdaq ever. I was
wrong but it didn’t cost me a dime. Then, by the beginning of
September 2000, I was ready to pounce as the market turned. 

And What Is The VIX Doing Now?

The VIX once again
hit lows not seen since September of 2000.

As did the Nasdaq 100 VIX (A.K.A. the VXN).

Keep in mind when studying the VIX that I am
referring to “low levels” on a relative basis. Relative
basis can be defined as news lows (highs) or when the VIX becomes
stretched away from its moving average(s). With that said, the VIX is
stretched on a relative basis by flirting with one-year lows and by
the fact that it is stretched away from its 10-day simple moving
average. This action creates a CVR III and CVR VI sell signal on the Market
Bias Page. As you may know, I prefer to use these systems (the III
and VI) like an overbought/oversold type indicator. A warning flag if
you will. Therefore, wait for a reversal in price/VIX before taking
action.

End Of Today’s Discussion On The VIX

Best of luck with
your trading on Tuesday!

Dave Landry

sentivetradingco@prodigy.net

P.S. Reminder: Protective stops on
every trade!

“…Your
book is organized, concise and well documented in your charts. It is
an easy read for a great system..”

Eric L. 

No risk,
30-day, money back guarantee