Last Thursday I was waiting for a CVR I buy signal to trigger. As you will recall, a CVR I buy occurs when the VIX makes a five-period high and closes beneath its opening price. In this case, the VIX made a one-month high (very significant!) and proceeded to sell off intraday, setting up a potential buy signal. With one minute left, the VIX was trading at 32.70, just under the 32.73 open. At the close, it upticked to 32.76, closing just above the open and nullifying the signal.
Common sense should have dictated that I ignore the last tick and go long the market. Unfortunately, I was true to my own â€œrigidâ€ rules and passed on the trade. My inflexibility and unwillingness to look at the grander scheme of things cost me many thousands of dollars as the stock market exploded more than 250 points higher over the next two days!
The moral of the story is that being disciplined and having fixed rules is important. Sometimes, though, it pays to look beyond the rules and look at the bigger picture.
Markets to Watch: Soybeans and soybean meal are the futures markets that look most interesting to me tonight.