Tuesday, March 31, 2009

More VIX Tattletales

Despite yesterday's distinctly negative performance, there were a few intraday trading setups using the VIX that yielded a few dimes and a quarter into the close.
On the 2 minute Qs chart above I've tracked the VIX trend with white heavy lines and the Qs price trend with orange lines.
Just for comparison I've added the buy sell signals generated by the SMA and MACD signal line crosses in the mid-panel and highlighted an obvious congestion area with the white circle.
While not foolproof, using the VIX is certainty useful as a confirmation for other technical triggers and, just as my cardinal trading rule is to never trade against the NYAD, a secondary rule would be not to trade against the VIX.
These rules apply to the Qs and the other index based ETFs like my mini-basket. Individual stocks may not conform to these rules.
As mentioned previously, the dynamic scaling issue must be recognized when using the VIX overlay and each day must be tracked on it's own, hence the suggestion of using 2 and 3 minute bars in lieu of larger time frames.

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