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Multi-listers, pl delete. This is a repost.
A few weeks ago there was a request re Larry Connors' book, Advanced Trading
Strategies.
It so happens that there are a couple of patterns setting up from his book
for today, May 16:
Here's something sent to two trading lists yesterday evening - an an
additional observation:
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Connors Vix reversals signals are well publicized, both at his
website and in his books.
Every once in a while, 2 or more of these signals line up simultaneously.
This is one of those times.
CVR2 is the 5 day RSI of VIX. Market is a sell on RSI(5) close
below 30 and an uptick thereafter.
CVR3 is the close 10% above or below the trailing 10 day simple ma
of VIX. Market is a sell on close below the -10% band and a
reversal back inside.
Per his book, these signals have a better than 60% accuracy rate.
In my experience,
a/ they are usually wrong at the major inflection points, when a
new intermediate bull trend is about to start.
b/ the combination signals are usually irrelevant at such
inflection points except for the very agile or the very patient.
c/ combination signals are better than single signals.
The trading horizon for these signals is 2 to 6 days (ie one takes
the signals per the triggers and then exits positions 2-6 days later).
Interested traders may check out price/vix action around Feb 1997
for reference to failures.
Historical data for VIX is also available going back to 1986 at
CBOE's website - for the really curious.
Representative chart for VIX attached.
Finally -
1. VIX calculation starts using next month options 8 days before
front month expiration. Hence today's vix uses Jun00 options.
2. The good OEX Doctor will probably write this off as, quote, "one
of the cottage industry" indicators.
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Additional observation:
>From the book "Street Smarts" (co-authored by Larry Connors):
Turtle Soup buy will get triggered on the VIX once VIX closes below 26.67
and then retrades above 26.67 or the eventual low of the current bar.
To recap the pattern from memory, pl feel free to correct me if wrong:
- Today's close = new 20 day low
- Prior 20 day low = >= 4 bars ago
- Buy on trade above today's low tomorrow (5/17).
- Stop below today's low.
Since VIX is a contrary indicator, the implication for rising volatility is
falling OEX. Usually.
Turtle Soup pattern chart follows in the next email.
As I get ready to send this, VIX just traded made a new 20 day low by a
hair.
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These setups are lined up in a decidedly bearish framework. My positions are
currently direction-neutral on the big indices. The positions will become
directional if we get a sustained move in either direction.
Gitanshu
Attachment Converted: "f:\eudora\attach\cvr0515001.gif"
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