Not looking to day trade myself.

 

Don't double down but fully leverage! I got a second mortgage to help.

 

I don't blame you. It'll take years off your life.

But my point was if the market is going to swing that much for so long, there's some money to be made.

 

Yeah there is. I saw an article about it the other day in WSJ. The point of the article was that day-traders like volatility because they can make fast money off of the swings in both directions.

To your other point yes, that is why I do not want to get into day trading. I have enough to deal with in my life as it is.

 

S&P 500 (price only index) closed 2011-06-10 at 1271.
Current low for the year was 2011-10-04 at 1075.
Close yesterday 2011-10-26 was 1242.

Did you ever refine your process for moving back in to non-money market style funds?

 

I got lucky and pulled 9% of the S&P for the YTD in my IRA. Just happened to buy bears in late April and sell them in the first week of August to buy some GOOG and AMZN and AAPL...

 

I have been watching the VIX and I think it may be about time to get back in for the long-term rally.

 

The S&P closed yesterday at 1285 (higher than when the first post in this thread was made) and you are feeling better about moving back in to equities versus, for instance, when we were posting on August 10th?


Again, I am not trying to say you are wrong or right. At this point, it's a really interesting bit of "behavorial finance" for me and it can serve as a sort of "investing journal" for you. By the way, if more of you are trying to be more active "market timers" it might not be a bad idea to keep a journal of what trades you made, why, and what sort of headlines or concurrent predictions were out there in the media. You could also add some thoughts on what would have to happen to make you counter your trade.

 

just using the google finance portfolios to track when you might have bought is a great way to learn.

if you are thinking of buying in today, go to google, add a portfolio called "test portfolio" and add $5000 worth of DJI at about the current price and see where it is in 2 months.

 

If be more worried about canada having to bail the USA out. ;p... But yeah I get your analogy. Personally I hope canada the usa and mexico never do an eu type pact. ******* scary.

 

The reality is more like imagining Newfoundland having to go directly to Quebec and the other provinces or Louisiana having to go direclty to Texas and the other states for financial assistance.

In Canada and the USA, we have central banks and central treasuries. The central treasuries continually transfer funds between states and provinces/territories. The EMU has a central bank but no central treasury.

In the USA, you can find some data on which states pay more Federal taxes than they receive in Federal spending. Some are habitual surplus states, some habitual deficit states and some move back and forth. For example, Florida used to regularly ocassionally run a surplus but has seen a deficit the last few years since the recession.

The differences are (A) it is an automatic, "behind the scenes" process and (B) despite our differences (for the most part), Floridians still view Californians as Americans - or Newfies still view Coasties as Canadians. The same cannot be said for the Northern and Southern Europeans, yet.

 

GDP of USA: 14.5 trillion

GDP of bailout Canada: 1.3 trillion

we've got a long way to fall before they bail us out.

 

So I think the decision to get back in is less based on where the market indices are at right now, and more on where it may be headed. I am concluding it may be time to get back in based on the two VIX criteria I described earlier. One, it is on a steady downward trend based on a 15-day moving average. Two, it is finally getting to where it is back in the 20s range.

So I may have missed the beginning part of the rally (hindsight investing is easy) but if the relationship plays out as before there should be a good long-term rally to follow.

 

Sorry; I guess I missed the above outline. I guess I would say - and the commentary is worth exactly what you are paying for it - that would not be enough data (two VIX measures) for me to outline a strategy. At most (to me), it might be useful for some short term trades.

Have you gone back and looked at the results of that trade (I haven't)? For example, "sell when VIX closes > 40; buy when VIX closes < 25.00 AND below 15-day MA")? Or refined further to something (hypothetically), like "buy/sell three trading days after" the above VIX characteristics?


Consider that SPY closed 2010/12/31 at 126.
It closed with a YTD high of 137 on 2011/05/02 (+9%).
It closed with a YTD low of 110 on 2011/10/03 (-20%).
The last close was 129 on 2011/10/28 (+17%).

So, despite all the wild gyrations along the way, the SPY was up about 2% for the year. Meanwhile, IEF (a 7-10 year Treasury Bond ETF) went from 94 on 2010/12/31 to 102 on 2011/10/28 (+9%).

 

2011-06-10
SPY (S&P 500 proxy) = 128
GLD (gold proxy) = 149
IEF (intermediate term US govt bond proxy) = 97

2011-10-03
SPY = 110 (closing low)
GLD = 161
IEF = 106

2012-04-02
SPY = 142 (closing high)
GLD = 163
IEF = 103


Assuming a buy-and-hold strategy from the day of the first post through last Friday's close:

2012-07-27
SPY = 139 (+8.5% vs 2010-06-10)
GLD = 158 (+6.0% vs 2010-06-10)
IEF = 109 (+12.4% vs 2010-06-10)

 

Using the the VIX as a reliable indicator is a pretty bad idea.

 

Go on...

Can you cite some examples, some data and/or clarify which type of indicator it would be bad for and in which way the VIX was used?