Monday, January 04, 2010

Monday VIXology

The PDQ Dashboard is uniform in its forecast for the VXX. Discounting the UUP which we would expect to be in sync with the VXX, the PQD is flashing 5 out of 7 shorts. Of some concern is the BD rating of the short signals for the Qs, DIA and IWM so we should set those aside until the equity curve slopes prove themselves once again. That leaves 2 short signals for the VXX based on divergent ETFs (SPY and EEM) with flat equity curve profiles.
While clearly not the strongest signal we might imagine, this bullish signal for equities does coincide with forward looking signals generated by the 4 panel style box below.
In past weeks the Dashboard has shown a tendency to project signals ahead of market momentum by a day or two. While this is certainly a great record, it's also frustrating to enter positions prematurely and suffer short term drawdown until the market complies. As a result, I've been fine tuning the z-score algorithm with the goal of eliminating this problem.
Stay tuned for a new version of the PDQ.
Volume continues to be very thin, further compounding the difficulty of assessing the value of technical signals.
As a risk management fallback tactic I'm focusing strictly on daytrade setups, especially the VXXEN, which has proven itself to be a easy-peasey way to trade for me . . . always wait for the cross.

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