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>it shows that our upside potential us limited to 25-30 SP points
Here is something else that adds the above expectation to tomorrow's OEX
action:
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.
FWIW. Always amazes me how the market sets up long volatility trades going
into Fed meetings.
Gitanshu
Attachment Converted: "f:\eudora\attach\cvr051500.gif"
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