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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: Challo Jeregy who wrote (37193)	4/19/2003 7:11:42 PM
From: PuddleGlum	Read Replies (2) \| Respond to of 57110

Challo, as promised here is more info on the VIX: Unless stated otherwise, I'm looking at the 200 day Williams%R of VIX: In April 2000 we had a sharp peak, but the market moved up only slowly and slightly over the next four months before reaching a major peak in August. Peaks of similar magnitude appeared in 9/01 and 7/03, both of which coincided with tradable bottoms. 3/30/94 and 10/27/97 also worked out quite well. However, there were many other trading opportunities that would have required one to relax the rules (trading on more moderate peaks), and therefore generated more false positive signals as well. As for extreme low levels of Williams%R, one can find 12/93, 1/95, 2/98, 7/98, 7/99, 8/00, 7/01, 1/02, 3/02, and 4/03. In 12/93 the signal came 3-4 months before the top, had you gone short on the signal in 1/95 you’d have been roasted in nothing flat, 7/98 hit the market top very accurately, but if you had shorted in 2/98 you’d have already seen a lot of red in your portfolio. 7/99 marked a minor top, but wouldn’t have given the average trader a great profit-making opportunity. 8/00 also marked a significant top. 7/01 was late for the top, but still advertised plenty of downside potential in the market. 1/02 was an effective signal, and 3/02 came close enough to a significant top so that one could have made good coin on the short side. It doesn’t take a close examination of that last paragraph to give one some confidence that the market is headed down, but the odd thing about charts is that it’s not just where you are that’s important, but how you got there. In terms of how we got here I’d say that Thursday’s extreme low on the VIX Willimas%R looks most like a consequence of the lower tops in Williams%R that we’ve been seeing since the sharp peak in July, ’02. That means that I’m willing to give the market a little more room than I would ordinarily leave when we reach such extreme levels. But I can't justify new long positions based on this info.