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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: Jenna who wrote (13583)	8/29/1998 5:49:00 PM
From: Jenna	Respond to of 120523

Beware!, Indicators are not truly calling bottoms. I have noticed how traders are slaves to their indicators.. Their indicators have called a 'bottom' and they rush to move in and buy. Of course you can buy for a hold for a few minutes to a 1/2 hour, but these traders are talking to me about position trading, intermediate holds and the like. Most of these indicators were wrong and the bottoms were the kind that are 'detachable' and can be lowered a notch. The VIX: Chicago Board option Exchange's Volatility Index, which is gauge of index-opting prices that is like an oscilloscope with high sharp vacillations that go higher when fear is at a high. Of course traders view this as a contrary indicator. When everyone is fearful they are bullish and buy.. The VIX surged into the mid 30's from below 30 as the Dow neared the 10% down threshold. Threads on SI dedicated to short term trades, trading methods and strategies, were shouting buy now! Get in at the low prices.. Right after that stocks went down even further and the VIX shot above 40 Thursday. Okay so what happened Thursday everyone thought this was now a bottom and we are so oversold we can't go anywhere but up. NOT SO.. Again traders, posters shouted.. buy now. On Friday we saw again, it was a 'no go'.. I was ready and concentrated on Friday from 7:30 in the morning until 10:00 and I saw what was going on. What did we have the VIX contrary indicator was wrong again. THE CBOE put/call ratio: A contrary indicator that suggested there was an bottom and now the recovery was at hand. It surpassed 1:1 a week ago Friday (anyting above .07:1 or so is considered high), everyone was assumed to be buying puts in a mass panic. things have to turn around.. Wrong again.. The Advancing Declining line reached the lowest level in 27 years after the debacle on Thursday. And analysts' were calling the market so oversold that buys were in order now. On Friday stocks jumped a bit at the open helping myself and some other sell the few calls that had bought the night before. *This was the time to buy puts as their prices came down*.. So I bought puts on the internet stocks. I've seen traders buy at the open right into the gap. NEVER buy into the gap, go the other way in this market. Wait for the first 1/2 hour before you go long. (unless you are so nimble as to daytrade a postion in 10-15 minutes as I'm sure some of you are). Here are some signals that should be seen before there is a real bottom. An analysts from Morgan Stanley Dean Witter says: ...CBOE put/call ratio "above 1 for several days" or a couple of truly skewed readings of around 1.5. He also wants to see the VIX spike into the 40's or, even better, the 50s as it did near last October's nadir. Traders, the time is coming where the S&P 500 futures will trade at a significant discount to their fair value, indicating real panic among traders willing to sell at so called undervalued prices. It is then and only then that we can come in and choose our stocks, options or futures among the ruins. You might miss the rally by a day or so, if you are looking to go long for a short term trade but so what it will be well worth the wait!