ES -- DX/CL -- isee -- cboe put/call -- specialist/public short ratio -- trinq -- trin -- aaii bull ratio -- abx -- cmbx -- cdx -- vxo p&f -- SPX volatility curve -- VIX:VXO skew -- commodity screen -- cot -- conference board

Wednesday, June 04, 2008

 

return to shorts


i've been considering it for some time -- actually taking on some SKF in late april, growing more convinced through may. here's the outline.

i run a general series on various indexes, and then some special series as well. i discussed a lot of the basic points of the general series in my last trading post. now the special series.

this is a volatility divergence study on the VIX -- in the second window running a standard MACD on the VIX against a 12-period average of the MACD; in the bottom window, charting the spread bewtween the VIX itself and its 75-day average. this essentially attempts to time mean-reversion in the VIX.

this is a cross-correlation study, which monitors the degree to which the stocks within an index are moving together or separately. the average issue average true range (AIATR) is expressed as the percentage of the average price. the orange line marks the ratio of the cap-weighted index ATR to the AIATR -- when the movement is dominated by large issues, the ratio will be high and this is thought to be a good buy point; the opposite is also true. these are long term signals. it turned positive on march 2003, negatively divergent from price in early 2007, and has remained negative since.

but a faster signal is the spread of the AIATR from its moving average -- essentially a different, component-basket specific measure of volatility. this is the bottom window, and it has turned up from a low level.

the hindenburg omen received some publicity in 2007, though it isn't nearly to infallible as many seem to believe. however, it has offered a second signal in 16 days -- a sell warning.

to bolster this pessimistic view, the lowry newsletter gave an intermediate-term sell signal in late may.

to sum up, a lot of indicators i follow suggest falling prices over the coming weeks.

UPDATE: a simple and interesting fundamental analysis of US equities from macro man.

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Some interesting work, GM. Thanks for sharing.

Cheers,

-Bill

 
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