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Dow Jones Ind Avg vs Retraced Spikes in VIX

DJ:DJI   Chỉ số Trung bình Dow Jones Industrial
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I define a spike to be when the VIX jumps by 5 points and then retraces by 75%. Once that spike has retraced, it creates a floor of support for the market for future pullbacks to hold. We have two of those levels from May and July which the market is pulling back to at this juncture. The September spike has failed to hold, which is the 18,000 level. Typically the market holds the TOP of the 75% retracement level on a pullback.

It "looks like" the market is "breaking down" on this time frame, with lower highs and lower lows, but what you can't see on this time frame is that buyers lurk just below the surface from the May & July time-frames where accumulation took place. We are now re-testing those buyers and given the US Presidential Election on Nov 8th, rational investors may hold off and "wait and see" what happens.

Spikes In VIX drive the market lower and create bargains for long term investors to buy and accumulate shares at a discount. In the long run, spikes in VIX are opportunities for larger, longer term investors to accumulate shares from shorter term, smaller investors.

An extra comment: The biggest spikes in VIX create the biggest bottoms in the market, so therefore, use the bigger spikes in VIX to find the bigger support levels. The smaller, only 5+ point rallies in VIX give less reliable levels, but still useful.

Look for my other charts on this pattern which has given so many reliable buy signals before.

Tim 9:39AM EST, Nov 3, 2016 17999.97 DJIA

PS - We all are nervous ahead of the USPOTUS election. Earnings season is coming to a close.
Bình luận: Click on the UPDATE button and see how it looks.

Now that VIX has retraced 75% again, we have another MAJOR SUPPORT level to provide support for the next pullback.
Bình luận:

We are 0.1 point away from a VIX spike here and we can monitor for another signal over the coming days.

Tim 6/21/2018 3:52PM EST
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Tim, agree with your technical comments. However, I am not sure if the macro aspects are correct ... not that I know any better. The reason for my macro concern is that rates are close to being raised. At some time it will be a reality too. Usually, when rates go higher, there is some amount of correction - the quantum depends on various factors, but in general, there will be some correction. When that happens, I suspect the market makers are not going to pull the market down in reaction, but they will do so by masking it as part of some other event such as this POTUS election. Would that not be a possibility?
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timwest harrypublic
@harrypublic, "Usually" is a probability and has to be traded with that in mind. I wish I saw your question two months ago. Look at the long term pattern of rate hikes and movements in interest rates. I challenge you to find a system where you use interest rates to trade the stock market consistently without major drawdowns in your equity curve. Interest rates are just one factor out of many. Check out my annual stock market forecasts and see the multitude of factors that are far bigger than interest rates. "Google: Tim West TradingView 2016 Forecast" or "2015" or "2014" or "2013" and see if you find the links and charts. Note my other charts too where I point out how bearish people are, and therefore they have already sold, ahead of the election. So, there wasn't anyone else left to sell, except a few big traders pushing their bearish bets and selling futures after Trump took the election. We can conclude from price action that people were "out" of the market to their "sleeping point" and short sellers were hoping for a big decline and bargain buyers were hoping for lower prices to buy... which is why a decline didn't happen. You need "sellers" to get a decline, not "hopers".
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@timwest, Thanks Tim !! Understood. Will also check out your previous annual forecasts.
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