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Strategies & Market Trends : John Pitera's Market Laboratory
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To: John Pitera who wrote (4399)8/23/2001 1:59:08 AM
From: macavity  Read Replies (2) of 33421
 
Sentiment is the one great unknown.


I just use stochastics and bollinger bands to try and pick/measure sentiment extremes.

VIX:
As I position trade (rather than intra-day) I look more at weekly data (13 week time frames)

stockcharts.com[g,a]daclnnmy[dd][pd63,3][iLp63,8,8]

The stochastic of VIX is good for picking up a lack of fear.
When this goes near/below 20 then I would generally say that the market is bullish/fearless.

Bollinger bands are good for picking up the spikes, but in all honesty it is quite obvious when they happen.

Play around with the parameters - I also do the same with $CPC. I just try and find the extremes.

This is why I am not looking for a VIX spike in excess of 30. It is summer time and the vols are easy.
Process vol (historic vol) is low so implieds will follow. No option trader is going to like trying to hedge his premium back in a slowly drifting market.
I read somewhere that CBOE option volume is at record highs showing that the flow is that someone is selling premium to the market, most likely owners of stock selling upside calls rather than selling their stock.

My reading here:
The market is not complacent (bullish), but could still quite easily spike down. (VIX 28-30)
With the markets o/sold in Daily/Weekly/Monthly. I would be careful adding new shorts. In fact I wont be. The time to sell has gone.

I am seeing a lot of bullish divergences between price and Momentum/OBV in stocks.

I am looking for an opportunity to go long the market and am just awaiting the market to 'show' me when, provided the April lows are not broken (on high volume / increasing negative breadth).

-macavity
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