Replies to post #18907 on General Stock Ideas

[gfp927z]

Bigworld, I know you aren't into market timing or shorter term trading, but the VIX can be used as a reliable signal to indicate interim market tops and bottoms.

The VIX spikes up when the market tanks, and then gradually drops back down as the market gradually rebounds. Using the VIX itself (not the VXX) provides a clear buy/sell signal that is almost always accurate. Using the VIX futures chart provides even better/clearer signals (Finviz is a good site -- https://finviz.com/futures_charts.ashx?t=VX&p=d1).

I remember you were looking at various strategies using the VXX or puts (going from memory), but using the VIX futures chart combined with the SPY looks like a simple and effective strategy. Amazing that I never noticed this system before, but for years I've been so anti-trading that I never even looked.

Anyway, this looks like a way to profit from stocks without having to make a long term commitment to the market. Personally I'd rather do buy/hold, but the required 'belief' just isn't there anymore, so this trading approach could be a viable alternative.

Right now the VIX is super low, reflecting the market at/near all time highs and indicating complacency. The buy/sell signals come at the extremes, and the VIX is indicating a near term overbought market that is vulnerable to a pullback. The RSI (near 70) for the S+P 500 and DJIA is also saying near term overbought. After the coming pullback/correction, the VIX will be way up, indicating the re-entry point.

[gfp927z]

Looking further into using VIX as a market timing tool, one problem is that the pre-Covid bottoms in the VIX were way lower than what we've experienced in 2020/21. Right now at 17.81 the VIX looks super low based on 2020/21, but in the pre-Covid years the VIX routinely based down around 12 (2018/19), and was even down under 10 in 2017.

So as the markets return to their pre-Covid 'normalcy' (if they do), then the behavior of the VIX might also return to a more normal pattern, and what seems low now for the VIX (17.81) may not correlate with a market top.

Oh well, back to the drawing board. There is always the RSI indicator and MACD, supplemented by the rabbit's foot, dice roll, pronouncements from the Mojo Man, etc..