Discretionary Trading
Now Reading
VIX Buy Signal Issued
50

VIX Buy Signal Issued

by The MoleAugust 14, 2017

It seems we once more have been spared from nuclear annihilation. Although if  you somehow got clickbaited into any of the MSM shill pieces on North Korea then you’re probably reading this cowered below your bunkbed in your make shift nuclear bunker. I for one couldn’t be less worried, as years of consuming massive amounts of GM wheat beer has effectively rendered me impervious to any type of radiation. I don’t even use a flashlight at night anymore as certain body parts have started to emit an orange glow.

2017-08-14_VIX_buy_signal

Alright you market mutants, it’s time to pay attention. There is a pretty good chance that we’re going to see a bonafide confirmed VIX Buy Signal at the end of the session today. At this very moment we only have an issued signal and if you remember for a confirmed signal we need three specific events:

  1. A close of the VIX outside of the 2.0 Bollinger Band (20-day SMA). check
  2. A close back inside the 2.0 BB. This issues the signal. check
  3. A close below the previous day inside the 2.0 BB. This confirms the signal.

Once you get those three events a major reversal usually occurs within the next week, arguable there is already one in the works. Why is it called a VIX Buy Signal? Because the ‘buy’ part refers to equities and not to the VIX.

2017-08-14_spoos

The E-Mini futures are looking pretty supportive right now, having extended their Friday gains overnight. The ES is in earshot of its 25-hour SMA, which will have to be taken today or tomorrow in order to set us up for another push higher. Should the ES fail to extend its gains and drop back below 2435 then the medium term bullish case starts to gain more credibility. For right now it’s an off-chance but let’s wait what happens in today’s session.

2017-08-14_gold_USDJPY

The Dollar bounced a little late last week and implicitly knocked down precious metals a peg or two. Here shown is the inverted USD/JPY which continues to be tightly correlated with gold.

2017-08-14_gold_update

Which incidentally was kicked out at 2.2R during a quick stab lower right through my trailing stop. I was a bit miffed last Friday but seeing it back below my trail this morning again is a bit of consolation. Now it’s a bit premature to consider a re-entry, first we need to get the lay of the land on the Dollar situation which at the current time remains unclear.

2017-08-14_crude_update

Our bond campaign is still in the running but only barely. The stop sitting at break/even was almost reeled in before the weekend but thus far appears to be well placed. This one is fifty/fifty right now – the daily looks very supportive but all those intra-day gyrations could easily kick us off the bus.

2017-08-14_crude_LT

Finally a longer term chart I wanted you all to see – crude. Ignore the daily panel on the left, which admittedly looks very bullish, and instead focus on the weekly panel on the right. Note how almost two years of sideways churn have squeezed those 100-week BBs almost to the max. This may continue for a few more weeks, even months but at some point there is going to be an explosion of epic proportions when crude finally breaks out and starts to burn all the shorts.

I hope I’ll be there riding the tip of that rocket when it happens. Preferably without the mushroom cloud at the end though ;-]


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • Mary

    I bought some XIV Friday afternoon for 77.70. Stop now at breakeven. Gonna hold for quite awhile unless stopped out.

  • Ronebadger

    Still have to wait for tomorrow’s close for that confirmation….I’ll wait…(that’s IF we close inside today’s BBs)

  • bravenewworld2011

    anyone research price action of VXX leading into expiration of the front month contract?

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    ..if high yield corporate bonds won’t roll over, why should I?

    BTFD!!!

    https://uploads.disquscdn.com/images/4ec60122a91d3a808de6f8feb8093fbbc5ed5667c6748d893bf6d09e69348b8b.png
    -GG

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • HD

    Range 2,454.96 – 2,464.20 anybody selling this 10 handle rally?

  • Grant

    Wait for the re-test!!

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    BTC
    4 and-a-quarter. Interesting.

  • http://evilspeculator.com Sir Mole III

    Yes – it basically is always trading against the wind as the VIX futures (which it is tied to) are (mostly) in contango. VXX constantly adjusts the ratio of the next two contracts.

  • Mary

    does it use the next 2 vix weeklies or monthlies?

  • HD

    so the VIX wanky set up is after 3 days the VIX will confirm the price action in SPX, SPX is up 30+ points so you start chasing long maybe on Tuesday or Wednesday? I will watch. OPEX week, I would suspect some whipsaw of any set up but that’s just me.

  • HD

    VIX is .618 (12.24) back last weeks range, just for comparison.

  • http://evilspeculator.com Sir Mole III

    The next two months. this should sort you out.

  • http://evilspeculator.com Sir Mole III

    Quiet Monday again – you guys are extending the weekend? Back to work you lazy buggers!

  • Julie

    Yes I am back to work Mole Two week vacation commences this Friday
    JULIE

  • OzarkHillBilly

    Just watching closely. Still long in a remaining small position from Thursday. Have almost hit the sell button a couple of times today, but my position keeps creeping higher. Likely to close it today, regardless, as it’s risky business.

  • Julie

    SPX has cleared it’s 21 ema …. Watching the all important close…… The bounce was off i’s daily 55 ema. Nice trade OZHB
    JULIE

  • Øyvind Nyhammer

    These kind of wild counter rallies you normally get during downturns. Does anybody else have the feeling that it is a bit early to jump in ?

  • bravenewworld2011

    I understand it being in contango on average, what I was curious about is what happens in the days leading up to expiry as the fund sells front month and buys the “new” month? No net change, just a dropping of price due to contango, or is the net result something else for those few days?

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Feelings will disappoint you frequently.

    Some of my best trades were ‘hold your nose’ and follow your developed signals.

  • Julie

    It is always positive when BKX and SOX are going up at the same time. Dipsters again buying at the 55 ema trying to cut a fat hog in the ass. I pegged BAC for a bounce today and thought USO would pullback today but not this much. RUT blasting off today….NDX above 5921 would be a positive IMO
    JULIE

  • http://evilspeculator.com Sir Mole III

    Vacation is for closers!

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • http://evilspeculator.com Sir Mole III

    Zero snapshot – low participation melt up followed by sideways camp:

    https://uploads.disquscdn.com/images/9c10eb6065bd7ffa20b6c55de2e23cfda9b05825164e4db33f35d56e9e90f710.png

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    she might not get the reference.

    https://en.wikipedia.org/wiki/Glengarry_Glen_Ross_(film)

    then again, SHE MIGHT!

  • http://evilspeculator.com Sir Mole III

    Øyvind – your assumption appears to be that we’re in a down turn. How would you know that? If you don’t remain objective the market will quickly separate you from your trading capital. Don’t worry about what’s beyond the horizon, just focus on what’s right in front of you. So what do you see today?

  • Julie

    YUP GG I had it too Like minds !
    JULIE

  • HD

    I don’t know how they do it but it’s always amazing to see them stop the tape dead, 3 hours now.

  • OJuice

    I meant to write this earlier, but, got distracted and the comments below reminded me. This may be useful for some of the non-regulars and lurkers.

    For Mole’s comment on /CL, I agree there is big potential. For me personally, the best way to navigate these situations is by adjusting exit strategy and not entry strategy. I keep following my signals and risk management as normal, however, when I get into a position and manage to adjust to break even stops, I the trade more flexibility and zoom out to longer periods for major spikes to adjust stops. To open up the opportunity for high rewards.

    The trap I have fallen into in the past would be to adjust the risk/reward ratio on the trade entry which would allow me to set larger stops because of the perceived improved returns. Only issue is that this longer term perspective was not completely compatible with the style/system and overall. And what is a good set-up on the weekly does not mean we cant re-test the lower 100 BB for example. Or chop around in a trading zone.

  • Øyvind Nyhammer

    What I see is that we bounced back from the B-top in the A-B-C downturn in the NDX from early June to early July. About 5800, it would be a nice place to turn around actually.
    But then there was this feeling thing … about sitting on the sidelines and see what happens.
    I am not a fast trader like you guys :)

  • Julie

    GG Mole you guys are funny ! Love this blog!
    JULIE

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Don’t discount your view, you could be right.
    The question is, do you have a plan?

    looking at the NDX quickly, I see a similar event in late 2015. The bottom just dropped out at NewYears.

    If the 55ema daily is surpassed, I will give it SERIOUS thought.

    http://stockcharts.com/h-sc/ui?s=%24NDX&p=D&yr=2&mn=0&dy=0&id=p03260808981
    -GG

  • OJuice

    If you could do a post on contango and backwardation it would be much appreciated.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    then again, maybe 5900 is a ceiling.
    Just depends on your lens.

    http://stockcharts.com/h-sc/ui?s=%24NDX&p=D&yr=1&mn=6&dy=0&id=p92593931524
    -GG

  • Julie
  • Øyvind Nyhammer

    Are your feelings running off with you :) Quite frankly i dont have a big plan.
    I am however hoping for a bit of a downturn since I am cash and would like buy a bit cheap stuff. Fully possible I get disappointed.
    Another thing I see is that oil have been celebrated over the last 3 weeks, everybody agreeing it can only go up. The actual price have stayed flat, and you know what they say: Flat tops produce drops (no science behind that one though).

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Sounds like you have some goals. that is a beginning.

    I cannot speak to oil, but as to energy – I see a drop in the near future.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • http://evilspeculator.com Sir Mole III

    This is like watching paint dry.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    4 years, remember the greeks?
    ah, that was funny.

    http://evilspeculator.com/watching-paint-dry-2/

  • http://evilspeculator.com Sir Mole III

    We are not fast traders – just seems that way when we snap into action at the proper moment. Reg. wave counting, used to do that way back right here and in the end realized that predicting the future is a sucker’s game. Saw the light in 2010 and never looked back. Sorry to break it to you but EWT no matter how you turn it has no predictive quality. You are better off just watching the price action and trade the path of least resistance.

  • http://evilspeculator.com Sir Mole III

    You’re making me feel old!

  • http://evilspeculator.com Sir Mole III

    So many faces that wound up disappearing. Trading is a tough racket, very few make it long term. Glad you’re still here.

  • OzarkHillBilly

    Thx. I’m out as of about 5 minutes ago.

  • HD

    The beauty of pattern recognition is it’s ok to be wrong. We bet on the highest probability with zero expectation of ‘predicting the future.’ Some patterns are more consistent than others. When I look at Nas I already see a 3-3-5 down complete. So for B wave I would only give it 2-3 days to turn around. Anything longer and probability diminishes greatly. Just my $0.02

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Glad to be here.
    It may be an understatement,
    but I stick with quality people. 😉

    https://images.successstory.com/adminimg/image_uploads/content_images/A-dream-doesn-t_1460723456.jpg
    -GG

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Mark Shinnick

    This might be a decent objective..

  • StockTalker

    Looks like a retrace, long /SI short /NQ

  • http://evilspeculator.com Sir Mole III