Thursday, October 29, 2009

An Old Bear Pattern

Taking a little break from my pair trading exploration, here's a snapshot of yesterday's Qs and the NYAD as seen on 5 minute bars. Quite a bit of quant blog traffic has been in an anticipatory mood, awaiting a bounce off oversold levels, but this chart should clearly show how unlikely such a move was on Wednesday.
For my own part, I was hesitantly bullish going into Wednesday's open if only because the NYAD typically falls to .08 to .10 levels prior to upside reversals and the previous intra day lows of the NYAD over the past few days have not fallen below .30. That changed dramatically yesterday as the NYAD made a steady descent to close at .11 as the VIX rose a full 12.5%.
For daytraders the real clue this was going to be a downtrending day was confirmed by the early VIX/Qs cross at 11:00. That was followed by a little whip saw and then another kiss off of the VIX at 12:00. The significance of these crosses has been examined in previous posts and reflects a pattern I call the VIXEN.
There were actually about 2 weeks of VIXEN related posts so if the concept intrigues you, scroll back in the archives for more details and examples.

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