I think that indicators like the VIX, VXN, BPs and plain old P&F charts can get skewed a little when everyone starts to watch them. But, I think that there is an underlying principle that makes them valid whether they are being watched or not. An example would be with the bullish percentages. If you have really high BPs, it is an indication that everyone who wants to buy, or has the ability to buy, has already done so. (this is straight out of "P&F Charting" by Tom Dorsey). If people don't have the ability to buy, the only thing that they can do at that point is sell. And when you get a lack of buyers and the prices start to drop on their stocks, well, it can cause panic selling. Same thing with breaking price supports.
Of course, if everyone is watching the VIX (something I doubt, beyond the messageboard walls), then I am sure that they lose some of their immediate accuracy, but not completely.
I do think that you are right about the statistical sample on SI no longer being valid as a cross section of the investing public. Even if we are talking perma bears and perma bulls, they are still smarter than the average perma bear and perma bull. |
