I have been so busy this morning making trades that I haven’t had time to really dig into what is driving the market today. It is on fire. Most all of my trades are moving so much, I am in and out on the peaks and troughs. I only have a minute or two here because I have to get back to work. Opportunity is banging on the door today. I do want to say, however, I said the big money was waiting for the rebalancing to slow down …
Here is a view on the VIX as a tool for trading. I like what the gentleman has to say, so I am passing it on to you.
- The VIX is (sort of) an indication of short-term trader sentiment. When the VIX gets too high – or too bearish – it usually means the market’s getting near a trade-worthy bottom. We saw a couple of high-VIX-market-bottoms in late August and early September. We also saw the market peak when the VIX was at an extreme low (when bullishness was rampant) in mid-September. It’s not an absolutely perfect tool, but it’s a good one, and one well worth following.
Currently, the VIX is at 13, more or less, and it has been grinding down since last Thursday when in peaked at 14.58 after a steady climb. Today represents that reversal.
Bullishness is on the move these days. The market is indicating this in all ways. Even though this is prime trading opportunity, we should be careful here. Too much bullishness scares the market.
- As of the week ending on January 2nd, 43.1% of the AAII’s voters say they’re bullish, and 29.3% are bearish; 27.6% of them are neutral. It doesn’t sound like wild bullishness, but that’s almost the highest level of bullishness we’ve seen in nearly three years. The peak was hit a week earlier, when bullishness was at 55.0% and bearishness was at 18.5%.
- It’s not just the AAII sentiment survey saying bullishness is rampant here. The Investor’s Intelligence Index now stands at 81%. That’s the highest level we’ve seen since January of 1987. The bullish percentage is at 59%, which is the highest level since September of 2008. The bearish percentage now stands at 14%, which is the lowest reading since early 1987.
- The Hulbert Financial Newsletter Sentiment Index (for all stocks) now stands at 82%… the highest reading in at least 15 years.
Sorry, but I have to get back to work. My trades are calling and I cannot ignore them. I have not seen such a day in quite some time.
Get out there and make some money!
Trade in the day; Invest in your life …
