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No VIX Buy Signal (Yet)

No VIX Buy Signal (Yet)

by The MoleAugust 2, 2011

For some reason the VIX buy/sell signal rules appear to be that one big mystery that continues to puzzle my stainless steel rats. Over the past three years I have posted the rules several times – but to no avail as I receive the same question over and over again. I guess that is the personal little purgatory I signed up for when I decided to introduce this little gem to the gray unwashed trading masses 😉

So for the nth time – here we go once more:

For a $VIX confirmed signal you need 3 events:

  1. A close outside of the 2.0 Bollinger Band (20-day SMA)
  2. A close back inside the 2.0 BB – this issues the signal
  3. A higher close (sell) or lower close (buy) than the close of the day back inside the 2.0 BB – this confirms the signal.

Once you get those three events a major reversal usually occurs within the next week. The sell signals used to be far more accurate than the buy signals, but in the past two years that relationship has reversed, thus I think it is dependent on the ongoing trend, which kind of would make sense.

So, what do we have going on right here today? We do have the close outside – check, we have a close in the inside – check. BUT, unless we have a drop BELOW 23.66 before the close we are not getting the confirmation. Which would mean no VIX buy signal and that’s very bad medicine for the longs.

And before you ask (and possibly incur my wrath) – no, a close below tomorrow would not matter. The whole enchilada resets and we would have to get a push outside the BB again first, followed by a close inside, etc.

Two more tasty charts for the subs:
[amprotect=nonmember] Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
[/amprotect] [amprotect=1,13,9,12,5]

The spoos however are lining up for a possible snap back as they are trading outside of both daily Bollingers. Now, in order to better time your long positions I propose two setups: One is to wait for an inside candle tomorrow (if it comes) or perhaps some type of variation buy setup á la Convict Scott. Two is to watch that hourly panel and to go long once the spoos breach their current NLBL at 1272.25 a push above 1280 would be confirmation IMNSHO. Of course those levels keep changing and I’ll probably update the chart here in the comment section later tonight.

AUD/JPY – very much related to the action in equities. Similar deal here – less extended on the daily Bollinger side.




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 the usual social media waterholes.
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