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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: chowder who wrote (19065)	3/5/2003 10:41:22 AM
From: kodiak_bull	Read Replies (2) \| Respond to of 23153

DB: "whether we can track sentiment readings using technical indicators." That's an interesting question, and one which won't be satisfied by just a few postings on an SI thread. My first cut at it says that using stochastics or MACD histograms to indicate the change in direction of the VIX, which itself is generally a predictor of some market moves (it does well on very big ones and mediocre on medium ones, imho), is probably introducing too much wobble into the system. Looking at the chart you posted, although the stochs and the MACD got some of the direction right (yes, it has the turns, generally, but then calls for reverses which don't occur and sees continuations which fail), but the histogram has a lot of bad signals. Then we have to ask, since the VIX itself is a leading indicator, what benefit does it get you to get a slight (and often erroneous) lead on a leading indicator that doesn't get all the movement and motion itself? As I said, I think this is something to think about. And it might be worth a close look if you are pretty sure of a big top (like VIX 66) and are looking for confirmation that the top is in, but for general trading ideas and signals it would probably be costly and dangerous. Which brings up another topic. SteveV sent me something where a guy, looking at the VIX, claimed to see reverse head and shoulders pattern. My gut tells me that the VIX acts as an oscillator, and that oscillators oscillate. They don't form cup & handle, head & shoulders, 3 black soldiers, evening stars, or bearish haramis. It's not what oscillators do. They oscillate. When it has oscillated too long below 20 and the market has gotten fat and happy, then it's a signal to beware, and prepare to exit. When the VIX oscillates higher and higher and does a final gut wrenching spike, then it's time to go against your tummy and buy, buy, buy. But head and shoulders, support & resistance? Idontthinkso. Kb