| Understanding Investor Sentiment Today - Part Two |
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Note: This is Part 2 in a three part series. Be sure to read Part 1 first. The VIX is a useful indicator but like all technical indicators there is an open ended question regarding the actual trading signals from the index. Too often I hear new traders say that "when the VIX is high its time to buy and when its low its time to go." That is a very contrarian thing to say and it begs the questions, how high is high and how low is low? This video will start to answer that question. There are clear signals that indicate when investor fear and psychology has gotten out of control and is likely to reverse. This is also true for when confidence it likely to shift and become more fearful as well. Besides a traditional support and resistance analysis the VIX will also exhibit divergences in investor sentiment with the S&P 500 index itself. These are powerful signals and although rare they can be a great forecasting tool for major shifts in market trend and risk. I will illustrate an example of one of these in the video. Because learning the VIX can be challenging I recommend a great tip to really internalize this information - teach it to someone else. If you can explain how the VIX works and why it is important to a friend, you are well on your way to really mastering this important and unique investing tool.  Proceed to Part 3 You can find a good example of some past video analysis of the VIX here.
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3.25 Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved." |
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