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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: marginmike who wrote (4158)	8/20/2000 8:32:29 PM
From: Matthew L. Jones	Read Replies (2) \| Respond to of 19219

From a purely "theoretical" understanding of the basis of the formulation of the VIX.X, you are correct-- the implied volatility of the near-term ATM puts and calls of the OEX stocks would indicate low volatility of a large basket (S&P 100 stocks) or very little commitment to a single direction (either up or down) based on major hedging of long or short positions. However, on a practical basis, very little hedging occurs against short positions... thus, generally speaking, the lows in volatility indicate market tops. Most S&P futures traders will tell you that VIX is a very practical and widely watched indicator in finding general market tops and bottoms using the 20 and 30 extreme lines. At least enough so that most large traders will significantly reduce long positions when 20 has been reached and likewise reduce short positions when 30 has been reached. Anyway, I was just throwing this indicator out because I was amazed that some of the sharp guys on this thread had not already done so. I lurk regularly on this thread and very seldom get a chance to throw out something that has not been already said <g>. You guys are very good at reading the broad market. I would say that the average swing trader could double his returns simply by reading this thread on a regular basis. Thanks again for the depth of insight. Matt