Scrappy Jack

iTrader: (2)

Yes.








You could look at ratios, using the overlay. You could look at "inflection points" (e.g. VIX at 40+ or some other value). If I were using the VIX/SPX relationship, I would make sure to see if there was some multi-day trend - not just a single day in a data set.

Torkel

Note also that the EMU isn't the same as the EU. For example, both Sweden and the UK are only members of the EU, but not the EMU and therefore hold their own currency, making them much less sensitive to other EU countries economy.

Germany (and others) is pissed, because they must help save their own currency, despite having done their own homework like good little countries. There is in reality no other option, since a drastic fall of the Euro would hit them very hard in their banking *****. Kicking out an EMU member of the EU would of course also sink the Euro, ending in the same problem.

But there are positive points in this. For example, When the Euro dives (because it will), I’ll probably take my Swedish SEK, drive down to Germany and get me a new-for-me BMW. Woohoo!!

Enginerd

iTrader: (1)

I ran a model last year in numerous stocks using an idea close to that. It followed xxx day moving averages and their intersections. Over a few years of data, the model was 90% accurated in pinpointing buy points within a percent or two of any given bottom. Its easy to create relationships like that. The difficult part is finding a broker that has the proper triggers to set up your buy and sell algorithms. All that **** is automated for the big players, so by the time you see the trend blossoming, you've missed your trigger.

vw_nut

iTrader: (1)

If you have a trading system that is 90% accurate, please share it with us. What do you need for triggers?

ZX-Tex

iTrader: (15)

Right, agreed on the trend, not a day to day. I can see that in the data. Thanks

ZX-Tex

iTrader: (15)

I heard a serious discussion last night on a serious radio show about the possibility of Germany and France dropping out of the EU. They only have two options really to get themselves out of this blank check situation they are in now.

Dropping out of the EU is one of them. Short term problems obviously, but long-term benefits for them at least. And, it could result in Greece and Spain having to really get their acts together. Sink or swim.

The other option would be for the EU countries to form a united government which through Germany and France could force Spain and Greece (and whoever else) to get their act together through direct legislation. However that is a very, very unlikely scenario. No reasonable way the citizenry of the EU countries would go for that level of unification.

So Germany and France most likely have to continue to prop up the losers in the EU, or get out of the EU entirely. I feel sorry for Germany in a way (spare the WW-II related comments, that was over 65 years ago). They had to go through the mess of absorbing East Germany, got their act together, became the economic powerhouse of the EU, and now have to deal with the underperformers. The chances of reciprocity are low. Under what conditions would Germany go into the toilet, and Greece would be in the position to bail Germany out? Not likely in this decade.

This is not a great analogy, but could you imagine the U.S. (and maybe Canada) being on the same currency as Mexico, and having to bail out Mexico? Holy sh.. that would be a mess. No thanks.

ZX-Tex

iTrader: (15)

Another interesting WSJ quote pertinent to this discussion...

Scrappy Jack

iTrader: (2)

I'm a little bit confused by his set up and multiple time frames.

If people had added money at the S&P 500 low in March of 2009 (intra-day 667) and held through today, they would be up over 75% on nominal terms (not adjusted for costs or dividends as you cannot invest directly in an index) even after the recent pull backs.

If he is suggesting that someone who moved to US large cap equities in March of 2009, then moved to cash on August 1 of 2011 is smart and/or lucky...

Well, I wouldn't argue with that.

However, since he believes there "are better bargains in store for stock buyers," it would be nice of him to tell us when he thinks those will appear and via what metrics his readers should identify them.

ZX-Tex

iTrader: (15)

So after doing some basic spreadsheet analysis with historical DJIA and VIX data (last 5 years) here is what I have come up with. The numbers are not exact yet so this is still a somewhat qualitative description.

Whenever the VIX spikes above 30 there is a proceeding drop in the DJIA. Volatility is very high right after the spike so day to day timing for me is out of the question. But, using a two or three week running average to smooth out the data (very noisy) some trends emerge. Once the VIX begins a clear downward trend, and drops below say 20 or so, then the market recovery follows. The recovery has actually already started at that point, but one only misses the first 1/8th or 1/4 of the rally. The longer you wait for the VIX to recover (drop), the clearer the trend, but the more of the rally one misses.

This trend only seems to apply to VIX spikes above 30 or so. There have been three or four of these over the last 5 years, including the current one, and the massive spikes during 2007-2008. The trend is not as clear for the smaller spikes, say under 20.

The initial high level of volatility is very clear with the current VIX spike. Hell the DJIA fell 4% today as of the writing of this post. So I am staying out at least until I see the downward trend in the VIX. It looks like it will take at least several weeks based on the past events. I plan to look at the S&P 500 index versus VIX when I get some more time.

Interesting stuff, really. Opening the floor to comments.

ZX-Tex

iTrader: (15)

Hmm... no comments from the peanut gallery.

Anyway the VIX has remained very high since I posted this so I am still staying out. A quick check of the funds I would have been in (had I not transferred the funds to a money market) shows that they are down 10-20% since I jumped out.

An interesting observation. HBO has been airing "Too Big To Fail" a lot this weekend. Good flick, good acting, follows the main events, and the accounts I have heard here and there. But I have no idea how much dialogue embellishment there was.

Scrappy Jack

iTrader: (2)

After trying to get the page to load a couple of times with Jeep ads, I gave up.

I think your VIX analysis is in the right direction. A big challenge is trying to determine the difference (if there is one) between correlation and causation. Also, as you pointed out, it's more of a coincident indicator than a leading one.

As I recall, the entire final scene is fictitious.

ZX-Tex

iTrader: (15)

Oh yes, good point, I totally agree. Long story short I deal with this at work. For this discussion, the inputs to the market system are so vast, and the 'mechanism' of the market is so complex, it is difficult to think of in terms of causation, beyond the basics, at least for me being a non-pro investor. So I am willing to consider correlation (based on empirical data) as good enough, as long as there is reasonable confidence that the correlation will hold.

Enginerd

iTrader: (1)

The only triggers I had available with TD Ameritrade were cost or percentage based. I logged back into my account today and realized the trading platform that I had used is now replaced with ThinkorSwim. When I stopped using the account, it was like quitting world of warcraft, I cashed out and never looked back...until now (for the stock market ...although I playing wow while drinking white russians was also a few years ago).

Scrappy Jack

iTrader: (2)

re: market dropping every time Obama gives a televised speech on the economy

A minor earthquake cleared out most of D.C. and the DJIA was up over 300 points.

Just sayin'.

vw_nut

iTrader: (1)

Look at their prodigio software. I am sure it would do what you want. (I'd play with it here at work, but am unable to download the desktop software to my work pc) The think or swim desktop rocks, but the web based trading is shitty at best, but it allows me to make trades at work and is better than trying to trade on my smart phone. I think all you have to do to get prodigio is call and ask for it.

vw_nut

iTrader: (1)

I watch the market everyday while at work. There is a very high correlation to Obama being on tv and the market going down for a period. I need to get a schedule of when he's going on TV so I can buy puts and 3x bear ETFs every time he's on. I bet 80%+ of the time he's on it drops a few points while he's giving his speach. It's like the market just hates seeing him.

Scrappy Jack

iTrader: (2)

Still paying attention to the nominal VIX and it's historical trends?

S&P close 09/07/2011 = 1199
Obama job speech after the market close on 09/08/2011
Market close 09/09/2011 = 1154

Just another datapoint.

Joe Perez

iTrader: (8)

Unrelated observation:

DJIA closed at 10,992 on Friday. I predict a sharp rally at the onset of trading on Monday (11,200?) followed by a gradual decline down to maybe 11,050 - 11,100 or thereabouts. The decline may happen on Monday, or it may require a few days.

I've got a fair but of rum in me at the moment and absolutely no data whatsoever to support this claim.

ZX-Tex

iTrader: (15)

Yep still looking at the data. I am still out of the market with 85% of my stuff in a money market fund. The VIX is starting to show a downward trend on a 10-day average but I am waiting for the VIX to get down below 25-20 before I get back in. It has stayed above 30 since the initial spike.
It seems like both need to be true (below 25 and on a 10-15 day average downward trend) for a long-term rally to take hold based on historical data. Otherwise any mini rallies in the major indices are at great risk of being cancelled out within a few days (if that long) because of all of the day-to-day volatility.

y8s

iTrader: (8)

daytrade the sinewave. if the market swings up and down 1.5-2% every few days like it has been since late spring, you can make some quick money. just dont double down.