Short Term Trading Member Forum

[Blackbelt1]

Cash--re: MaxPain

My studies say this indicator is all but useless as an indicator of market direction. The indicator creates the *illusion* of reliability because most stocks and indices *do* tend toward the center of the distribution. However, this tendency is not a predictor, in my opinion.

I have found that time after time when a stock is way out of line with the MaxPain indicator, a toss of a good, old-fashioned quarter will do as well. A recent example is TOL--in both December and January. One might theorize that where the market is heavy on puts, the indicator might do better in predicting a bounce. Not so in my experience. Sometimes it does in fact work, but so does a flip of my quarter.

Heads or tails.

Black