Wednesday, July 1, 2009

Timing of VIX Bottom

Based on a number of factors, including my recent comments in VIX at Seasonal Cycle Low, I believe there is a very good chance the VIX may put in an intermediate-term bottom either today or tomorrow.

16 comments:

  1. Well either that or Vix back to teens again! New Bulltard market born! ya, righ, fu... During this 2 month is been hell for shorts, really, after this 2 month torture, who the fu** in their right mind would ever want to short again?

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  2. Hi Bill and All,
    I've been reading for a while, but this is my first post.

    I was reading on another site this morning that according to the analyst, the $SPX looks to be setting up a head and shoulders top. And looking at the chart it seems right to me. (I'm a fairly new trader though).

    The left shoulder would be at the May peak, the head at the June peak, and the right shoulder forming now.

    Is anyone else seeing this?

    Don

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  3. yes I see it this way too:)
    and i am waiting patiently to short, not like the guy from the first post:)
    Marketh breadth indikators, which i follow are saying we are near to a top....

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  4. hasbeard,

    I'm no expert either but yes, I've seen the H&S developing during the last few sessions. However, we're not the only one noticing this pattern. Actually, I believe every pattern trader has spotted it and the media have been talking about it recently (CNBC for example). What does it mean to me? An increasing probability of a fake breakout on the downside with every small players like ourselves rushing to short sell. We should have our answers at the beginning of next week.

    Disclosure: short global indices

    Cheers

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  5. Hasbeard, yes I think the problem is that too many people is eyeing that which makes it invalid... It would be too easy...

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  6. Hasbeard, I was just blog serfing and run into this chart, for your reference, H&S (or inverse H&S) does not work out unless is confirmed. You can trade base on the assumption, but when thing don't look right get out or reverse the trade...

    http://3.bp.blogspot.com/_RZ_mL2cRGpk/Skkgg9lARSI/AAAAAAAADN8/mzOmT2V9PY0/s1600-h/mwiv.png

    Usually a H&S would be best if we break the neckline and then do a quick back test and down we go to confirm that H&S is valid. The target would be from the top of head to neckline minus the neckline. I've seen alot of H&S don't work out even it breaks and then do a bear trap. Once the neckline break, it should never rise back above it before it reach the target price. If it does, then most likely is a bear trap... Good Luck...

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  7. hasbeard,

    Trying to game who is and isn't watching a pattern isn't, in my opinion, the way to do technical analysis. What you want to do is wait for the pattern to confirm by going below a certain price. Then, enter when it does, but also figure out what your exit price (stop loss) needs to be, assuming the pattern is valid. In this example, any new high on the SPX would be your sign to get out of the trade.

    That way, you don't psyche yourselfe out beforehand by saying "Oh, everyone sees that so it won't work" and you don't leave yourself exposed to any more risk than you need to (and all trading requires some risk exposure).

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  8. Here's a link to a video about this H&S
    http://blog.afraidtotrade.com/hewison-gives-timely-sp500-update-in-new-video/

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  9. Thanks for the comments guys and the link to the video vovor. And thanks for the chart link Anon.

    I already have a short position in LNCR, but that can change quickly. :;

    But for the future the main thing you're telling me seems to be, you're taking a risk if you don't wait for the pattern to be confirmed.

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  10. Hasbeard,

    "you're taking a risk if you don't wait for the pattern to be confirmed."

    But there is always risk involved in trading. They thing we try to do is to minimize the risk. H&S pattern, at least for me, waiting for confimration is too high of risk. Waiting for confirmation is to wait for neckline to break (for aggressive short, short at break) or for conservative, short at back test of neckline, is TOO MUCH RISK. So like SPX right now, is best time to short at the high of right shoulder. Risk is only from right shoulder to the head, much less risk then from neckline to head (or shoulder).

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  11. The SPX 500 index does appear to be forming a head and shoulers pattern and the VIX index is trading near its lowest level of 2009 and at levels not seen since September 2008. One may want to purchase some August VIX call options since the risk is limited relative to shorting the S&P futures.

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  13. hasbeard,

    I have been publishing about a head and shoulders formation since the beginning of June.

    Head and Shoulders on the Dow

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  14. Similar arguement:

    http://investorshub.advfn.com/boards/read_msg.aspx?message_id=39222598

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