$VIX chart! Be careful in trading.

[john_for_u80]

http://stockcharts.com/h-sc/ui?s=$VIX&p=D&b=5&g=0&id=p36721731012

Smart Money/Professional traders are waiting for VIX to reach above 30. When VIX reaches 30 or above, money will start flowing into the market in good strong stocks.

Jan and March lows got VIX above 30. Market is falling but VIX is not going up. Market needs panic. More the panic higher the VIX!

Wait for that and keep some money with you because right now it is not the time to jump in for all. Buy small position at support.
Keep your buy orders lower at support like couple $ above 50 DMA.

eg:

http://stockcharts.com/h-sc/ui?s=pot&p=D&b=5&g=0&id=p36721731012

http://stockcharts.com/h-sc/ui?s=chk&p=D&b=5&g=0&id=p36721731012

Be watchful and careful. Good to be on sidelines right now or enjoy the bear wave with some ultra shorts.

[englishman26]

Definitely agree with the "don't buy" sort of conclusion but the vix might not be the best measure at the moment. It's obviously not really a measure of fear (as I keep hearing on CNBC - as if it psycho-analyzes traders through their computers!), nor is it really a measure of volatility as the vix actually claims to be. What it is is a measure of volume and it spikes when volume to the downside spikes (hence the fear claim). But volume is just low in either direction at the moment - partly because it's the summer, partly because no-one wants to be a buyer. So there's plenty of fear - the vix just isn't measuring it. There's also plenty of patience, apathy and vacationing - the vix isn't measuring that either! At these volumes, the dow could go down another 1000 points and the vix still wouldn't reach the levels it hit back in jan and march.

[aiki14]

I use the VIX as a portfolio hedge, and being a believer in the market having bottomed in Jan and March it has been very timely. My market call clearly has been erroneous except for energy so I have been very fortunate to have VIX options and futures positions.
If the VIX hits the same levels as it did in March I will be buying with all possible aggression across many sectors, right now I'll stick with oil.

By the way for those who may not be into VIX futures, they are 1000 to 1 leveraged and can be formidable hedge vehicles.

[john_for_u80]

I think I have posted this chart before:

http://stockcharts.com/charts/gallery.html?$nya50r

This chart gives you the idea as where most of the stocks are and the market rallies after certain level is reached. This time extreme may be very low. Who knows?

Also look at some huge volume stocks which closed on Friday.

HK, TRA, QTWW, WLT, CF, IVAN. (Retailers cannot buy these stocks on such a huge volume). Adding small position of these stocks on dips near support might be a good idea.

I can remember of these right now. I will add more if I remember.

[madcowdisease]

Definitely agree with the "don't buy" sort of conclusion but the vix might not be the best measure at the moment. It's obviously not really a measure of fear (as I keep hearing on CNBC - as if it psycho-analyzes traders through their computers!), nor is it really a measure of volatility as the vix actually claims to be. What it is is a measure of volume and it spikes when volume to the downside spikes (hence the fear claim). But volume is just low in either direction at the moment - partly because it's the summer, partly because no-one wants to be a buyer. So there's plenty of fear - the vix just isn't measuring it. There's also plenty of patience, apathy and vacationing - the vix isn't measuring that either! At these volumes, the dow could go down another 1000 points and the vix still wouldn't reach the levels it hit back in jan and march.


I know the general belief is the VIX is a measure of volatility. But I think I heard from Najarian on Fast Money some time back it is a measure of put buying. Am I incorrect on this one?

[john_for_u80]

I know the general belief is the VIX is a measure of volatility. But I think I heard from Najarian on Fast Money some time back it is a measure of put buying. Am I incorrect on this one?

Vix, what is it?

The VIX takes the weighted average of implied volatility for the Standard and Poor's 100 Index (OEX calls and puts) and measures the volatility of the market. A low VIX indicates trader confidence. A high Vix the opposite. Dividing the S&P 500 by the Vix (ratio) gives the confidence level in relation to the market. The higher the ratio the higher the confidence. As always, when sentiments go to extremes, it could be time to pay attention.