When it comes to the S&P futures, the trin and the vix are extremely reliable at predicting where the spoos will go. Both indices are not only predictable in terms of pattern but also in terms of how far they will move before turning. The secret lies in creating a standard unit of measurement by which their respective trends are first established and then based on the trend, project how far they will go.
For example it is Wednesday morning 1070228 and based on just the Vix alone, I know the market will rally to a degree because the vix has established a trend down. I have certain rules for establishing a trend and then project how far that trend will continue given how far it has already moved.
02/27/2007
1890 2:06pm
1774 2:13pm
1757 2:19pm
16.75
16.08
15.42
14.59
13.90
You notice that at 2:19 we had established a trend down and I know that the vix will continue down and eventually hit one of my projected numbers with an accuracy of .02. If it doesn't hit one of my first series of numbers, then I rerun the calculation with additional data.
02/27/2007
1890 2:06pm
1774 2:13pm
1757 2:19pm
1741 2:24pm
16.49
15.74
15.00
14.08
13.30
And again if the vix does not hit any of these numbers I continue on with my calculation until it does hit my projected numbers. Furthermore, I also know that if it hit one of my first projected numbers it will also hit a second, and if it hits a second it will likely hit a third. Generally it will not go further than a fourth or fifth hit, unless we have highly unusual market conditions like yesterday.
So consequently in going long on the market this morning at 9:13 cst I can wait, sit back and relax and know that I need not worry about the market coming back on me until my numbers are finally being hit. This maximizes single trades and avoids the practice of scalping which really is quite inefficient.
This method was so effective yesterday, a single trade pulled 30 points simply by knowing how far the trin and the vix will likely move before they turn.
02/27/2007
1890 2:06pm
1774 2:13pm
1757 2:19pm
1741 2:24pm
1679 8:37am
1671 8:59am
15.36 HIT EXACTLY AT 9:46 AM CST ON 2/28/2007
14.26
13.17
11.81
10.67
So when one of these projected numbers is hit I can then determine if other market condition are favorable for exiting the trade.
This single move was worth no less than 12 points.
The same formula produced the results in the subsequent screen shots.
For example it is Wednesday morning 1070228 and based on just the Vix alone, I know the market will rally to a degree because the vix has established a trend down. I have certain rules for establishing a trend and then project how far that trend will continue given how far it has already moved.
02/27/2007
1890 2:06pm
1774 2:13pm
1757 2:19pm
16.75
16.08
15.42
14.59
13.90
You notice that at 2:19 we had established a trend down and I know that the vix will continue down and eventually hit one of my projected numbers with an accuracy of .02. If it doesn't hit one of my first series of numbers, then I rerun the calculation with additional data.
02/27/2007
1890 2:06pm
1774 2:13pm
1757 2:19pm
1741 2:24pm
16.49
15.74
15.00
14.08
13.30
And again if the vix does not hit any of these numbers I continue on with my calculation until it does hit my projected numbers. Furthermore, I also know that if it hit one of my first projected numbers it will also hit a second, and if it hits a second it will likely hit a third. Generally it will not go further than a fourth or fifth hit, unless we have highly unusual market conditions like yesterday.
So consequently in going long on the market this morning at 9:13 cst I can wait, sit back and relax and know that I need not worry about the market coming back on me until my numbers are finally being hit. This maximizes single trades and avoids the practice of scalping which really is quite inefficient.
This method was so effective yesterday, a single trade pulled 30 points simply by knowing how far the trin and the vix will likely move before they turn.
02/27/2007
1890 2:06pm
1774 2:13pm
1757 2:19pm
1741 2:24pm
1679 8:37am
1671 8:59am
15.36 HIT EXACTLY AT 9:46 AM CST ON 2/28/2007
14.26
13.17
11.81
10.67
So when one of these projected numbers is hit I can then determine if other market condition are favorable for exiting the trade.
This single move was worth no less than 12 points.
The same formula produced the results in the subsequent screen shots.