Wednesday, September 19, 2007

Qs looking overbought

We are getting RSI signal confirmation between the Qs and the VIX suggesting the markets may fade the Friday expiration. As expected, the Qs did carry through with a pop at the open and then faded down for the rest of the day.
Dr. Brett has a different spin on current conditions and makes the case for continued strength.
FYI - Buying yesterday's close and selling at the open today was pretty much a sure thing given the substantial momentum of yesterday's last hour. CXO ran an interesting little study of buying the close and selling the open for the Qs, DIA and SPY. Adding a couple filters like a 3 DSMA, a 10 DSMA, a STO on the rise above 60 or an RSI on the rise above 60 can increase the results substantially. This is an EOD system that doesn't require a lot of maintenance, but you need to be prepared for those days when the news goes against the grain and you get a gap down at the open. More variations of this system this weekend.
The VIX had a narrow range day, flashing a doji and closing precisely on the lower band and hinting that a reversal is imminent (amplitude and duration unknown, but 20 DSMA is likely target). VIX and More also makes a case for higher VIX readings in the next few sessions.

1 comment:

Cuccaa said...

Interesting CXO article, one of my commentors and I did some test on that very thing, what brought it up was my comment about the propensity for the Q's to open in the direction of the closing candle on a 15 min. chart of the Q's, IE green candle open up, red candle open down. He ran some tests on Tradestation or Worden, I forget which, and said it works best on a ten minute time frame.