VIX and More...Short Term Negative

The setup discussed on Thursday arguing for a higher close in the short term was fulfilled successfully on Friday. In that blog entry, i also pointed to a previous gap-up related study that argued for a lower close in the short term should be close up Friday. Given that we did close up Friday, i'd like to present that study once more.
On Thursday, the S&P painted a gap and run candle (Thursday's low was higher than the previous day's high). This was followed Friday by yet another higher close. Surprisingly, since 1990, there have only been 11 similar occurrences. In 10 out of 11 cases, the market was trading lower within 3 days.

(Note: column '3Day+' displays the number of days it took the S&P to close higher within the next 3 days. a value of 0 indicates the market did not close lower within 3 days)

Ticker	Date/Time	Close	3Day-	%Chg N1	%Chg N2	%Chg N3
SP500	10/2/1990	315.21	1.00	-1.21	-0.80	-1.18
SP500	6/15/1992	410.29	1.00	-0.48	-1.96	-2.27
SP500	10/18/1996	710.82	1.00	-0.14	-0.60	-0.50
SP500	9/27/2007	1,531.38	1.00	-0.30	1.02	1.00
SP500	11/29/2007	1,469.72	3.00	0.78	0.18	-0.47
SP500	12/24/2007	1,496.45	2.00	0.08	-1.35	-1.20
SP500	4/3/2009	842.50	1.00	-0.83	-3.20	-2.06
SP500	4/13/2009	858.73	1.00	-2.01	-0.78	0.77
SP500	6/2/2009	944.74	1.00	-1.37	-0.24	-0.49
SP500	7/16/2009	940.74	1.00	-0.04	1.10	1.47
SP500	9/9/2009	1,033.37	0.00	1.04	0.91	1.55
SP500	10/9/2009	1,071.49	0.00	0.00	0.00	0.00

Over the past 5 days, we have seen the VXO (the 'old' VIX) decline over 20% (on a closing basis). This presents another high probability short setup. There have been 61 similar occurrences over the past decade where the VXO has retraced more than 20% in one week. In 52 cases (or 85.25% of the time) , the S&P 500 was trading lower within 3 days.

Ticker	Date/Time	Close	3Day-	%Chg N1	%Chg N2	%Chg N3
SP500	6/21/1999	1,349.00	1.00	-0.97	-1.18	-2.46
SP500	6/22/1999	1,335.88	1.00	-0.21	-1.50	-1.54
SP500	8/17/1999	1,344.16	1.00	-0.84	-1.53	-0.56
SP500	10/22/1999	1,301.65	1.00	-0.62	-1.52	-0.38
SP500	2/4/2000	1,424.37	1.00	-0.01	1.22	-0.89
SP500	3/3/2000	1,409.17	1.00	-1.27	-3.80	-3.01
SP500	4/24/2000	1,429.86	0.00	3.33	2.18	2.45
SP500	9/27/2001	1,018.61	0.00	2.19	1.96	3.21
SP500	9/28/2001	1,040.94	1.00	-0.23	1.00	3.01
SP500	2/13/2002	1,118.51	1.00	-0.18	-1.28	-3.14
SP500	7/29/2002	898.96	3.00	0.42	1.41	-1.59
SP500	7/30/2002	902.78	2.00	0.98	-2.01	-4.27
SP500	7/31/2002	911.62	1.00	-2.96	-5.20	-8.45
SP500	8/19/2002	950.70	1.00	-1.40	-0.14	1.26
SP500	11/20/2002	914.15	0.00	2.15	1.79	2.05
SP500	3/29/2004	1,122.47	0.00	0.40	0.33	0.86
SP500	3/30/2004	1,127.00	1.00	-0.07	0.46	1.31
SP500	5/19/2005	1,191.08	1.00	-0.15	0.23	0.25
SP500	5/20/2005	1,189.28	0.00	0.39	0.40	0.06
SP500	5/23/2005	1,193.86	2.00	0.02	-0.32	0.31
SP500	11/3/2005	1,219.94	3.00	0.02	0.24	-0.11
SP500	6/20/2006	1,240.12	0.00	0.97	0.44	0.35
SP500	6/21/2006	1,252.20	1.00	-0.53	-0.61	-0.13
SP500	7/25/2006	1,268.88	1.00	-0.04	-0.45	0.76
SP500	8/18/2006	1,302.30	1.00	-0.37	-0.27	-0.71
SP500	3/9/2007	1,402.84	2.00	0.27	-1.77	-1.12
SP500	3/12/2007	1,406.60	1.00	-2.04	-1.38	-1.02
SP500	3/20/2007	1,410.94	0.00	1.71	1.67	1.78
SP500	3/21/2007	1,435.04	1.00	-0.03	0.07	0.17
SP500	3/23/2007	1,436.11	2.00	0.10	-0.52	-1.31
SP500	6/19/2007	1,533.70	1.00	-1.36	-0.75	-2.03
SP500	7/3/2007	1,524.87	0.00	0.03	0.37	0.46
SP500	8/22/2007	1,464.07	1.00	-0.11	1.05	0.19
SP500	8/23/2007	1,462.50	3.00	1.15	0.29	-2.06
SP500	8/24/2007	1,479.37	1.00	-0.85	-3.18	-1.06
SP500	9/19/2007	1,529.03	1.00	-0.67	-0.21	-0.74
SP500	9/21/2007	1,525.75	1.00	-0.53	-0.56	-0.02
SP500	9/24/2007	1,517.73	1.00	-0.03	0.51	0.90
SP500	12/21/2007	1,484.46	3.00	0.81	0.89	-0.55
SP500	12/24/2007	1,496.45	2.00	0.08	-1.35	-1.20
SP500	12/26/2007	1,497.66	1.00	-1.43	-1.28	-1.96
SP500	2/1/2008	1,395.42	1.00	-1.05	-4.21	-4.94
SP500	3/24/2008	1,349.88	2.00	0.23	-0.65	-1.79
SP500	3/25/2008	1,352.99	1.00	-0.88	-2.01	-2.79
SP500	4/18/2008	1,390.33	1.00	-0.16	-1.04	-0.75
SP500	5/19/2008	1,426.63	1.00	-0.93	-2.52	-2.26
SP500	7/21/2008	1,260.00	3.00	1.35	1.76	-0.59
SP500	7/22/2008	1,277.00	2.00	0.41	-1.92	-1.51
SP500	10/31/2008	968.75	1.00	-0.25	3.82	-1.65
SP500	11/3/2008	966.30	2.00	4.08	-1.40	-6.36
SP500	11/4/2008	1,005.75	1.00	-5.27	-10.03	-7.43
SP500	11/5/2008	952.77	1.00	-5.03	-2.29	-3.52
SP500	11/26/2008	887.68	2.00	0.96	-8.05	-4.38
SP500	11/28/2008	896.24	1.00	-8.93	-5.29	-2.85
SP500	12/19/2008	887.88	1.00	-1.83	-2.78	-2.22
SP500	12/22/2008	871.63	1.00	-0.97	-0.40	0.13
SP500	1/27/2009	845.71	2.00	3.36	-0.07	-2.34
SP500	3/12/2009	750.74	0.00	0.77	0.42	3.65
SP500	6/29/2009	927.23	1.00	-0.85	-0.42	-3.32
SP500	9/10/2009	1,044.14	1.00	-0.14	0.50	0.81
SP500	10/9/2009	1,071.49	0.00	0.00	0.00	0.00

Lastly, over the past week, the VIX has moved from trading well above it's 10MA to now trading below it's 10MA by 10 percent or more. There have been 124 cases in the past decade where th VIX has closed below it's 10MA by 10% or more. In 102 cases (or 82%), the S&P 500 was trading lower within 3 days.

These studies argue for a close lower than 1071 by Wednesday.

Gap Up In A Long Term Trending Market

The S&P today gapped up and although it finished off it's highs, printed an unfulfilled gap on the daily chart. Looking back for times where the S&P has done this in a long term trending market (defined by the S&P trading above it's 200 MA), we find 26 previous occurrences since 1980. In 21 cases, or 81% of the time, the S&P was trading higher within two days.

Ticker	Date/Time	Close	2Day+	%Chg N1	%Chg N2
SP500	11/5/1980	131.33	0.00	-1.84	-1.64
SP500	9/14/1982	123.10	1.00	0.97	0.54
SP500	10/7/1982	128.80	1.00	1.75	4.40
SP500	11/26/1982	134.88	2.00	-0.50	2.71
SP500	12/7/1982	142.72	0.00	-0.63	-1.91
SP500	2/24/1983	149.60	1.00	0.09	-1.03
SP500	3/2/1983	152.30	1.00	0.77	0.90
SP500	4/11/1983	155.14	1.00	0.44	1.05
SP500	5/4/1983	163.31	1.00	0.59	1.71
SP500	6/14/1983	165.53	1.00	0.96	2.18
SP500	6/30/1983	167.64	1.00	0.60	-0.62
SP500	7/1/1983	168.64	0.00	-1.21	-0.09
SP500	10/6/1983	170.28	1.00	0.31	1.39
SP500	10/7/1983	170.80	1.00	1.08	-0.27
SP500	10/25/1983	166.47	0.00	-0.65	-0.98
SP500	8/3/1984	162.35	1.00	0.15	0.23
SP500	6/13/1986	245.73	1.00	0.16	-0.56
SP500	6/12/1992	409.76	1.00	0.13	-0.35
SP500	12/18/1992	441.28	0.00	-0.13	-0.22
SP500	10/17/1996	706.99	1.00	0.54	0.40
SP500	9/26/2007	1,525.42	1.00	0.39	0.09
SP500	10/29/2007	1,540.98	2.00	-0.65	0.55
SP500	6/1/2009	942.87	1.00	0.20	-1.18
SP500	7/15/2009	932.68	1.00	0.86	0.83
SP500	8/21/2009	1,026.13	2.00	-0.05	0.18
SP500	9/8/2009	1,025.39	1.00	0.78	1.83
SP500	10/8/2009	1,065.48	0.00	0.00	0.00

Of course, should this occur tomorrow, it may set us up for an ST sell based on the study discussed here (Higher Close after Clean Gap Up - Short term negative)

What typically happens when the VIX trades completely outside of it's bollinger bands?

On Friday, the VIX closed above it's upper bollinger bands (20,2) for the second consecutive day. In fact, on Friday, the VIX painted a black candle completely outside of it's band. Looking back over the past decade for similar closes, we find 23 occurrences where the VIX close was lower than it's open and the VIX low as above it's upper bollinger bands. In 20 of those cases 87%), the S&P 500 was trading higher within 3 days.

Ticker	Date/Time	Close	VIX	3Day+	%Chg N1	%Chg N2	%Chg N3
SP500	11/19/2003	1,042.44	18.65	3.00	-0.84	-0.69	0.92
SP500	5/3/2004	1,117.49	16.61	1.00	0.18	0.36	-0.31
SP500	1/4/2005	1,188.05	13.93	0.00	-0.36	-0.01	-0.16
SP500	3/23/2005	1,172.53	13.88	2.00	-0.09	0.15	-0.61
SP500	4/18/2005	1,145.98	16.41	1.00	0.59	-0.74	1.22
SP500	5/16/2005	1,165.69	15.67	1.00	0.70	1.70	2.18
SP500	7/7/2005	1,197.87	12.48	1.00	1.17	1.80	2.03
SP500	1/17/2006	1,283.03	11.87	2.00	-0.40	0.16	-1.68
SP500	1/23/2006	1,263.82	13.58	1.00	0.24	0.07	0.79
SP500	4/10/2006	1,296.62	12.04	0.00	-0.78	-0.66	-0.58
SP500	5/24/2006	1,258.57	17.13	1.00	1.14	1.72	0.10
SP500	7/17/2006	1,234.49	17.75	1.00	0.19	2.05	1.19
SP500	12/8/2006	1,409.84	11.91	1.00	0.23	0.12	0.24
SP500	8/1/2007	1,465.81	23.26	1.00	0.44	-2.23	0.13
SP500	8/16/2007	1,411.27	30.44	1.00	2.46	2.43	2.54
SP500	10/22/2007	1,506.33	21.38	1.00	0.88	0.63	0.54
SP500	11/8/2007	1,474.77	25.32	3.00	-1.43	-2.41	0.43
SP500	1/18/2008	1,325.19	26.27	2.00	-1.11	1.01	2.03
SP500	3/17/2008	1,276.60	31.10	1.00	4.24	1.71	4.14
SP500	6/9/2008	1,361.76	20.78	0.00	-0.24	-1.93	-1.61
SP500	9/10/2008	1,232.04	23.80	1.00	1.38	1.60	-3.19
SP500	10/16/2008	946.43	66.51	2.00	-0.62	4.12	0.91
SP500	9/2/2009	994.75	28.41	1.00	0.85	2.18	3.08
SP500	10/2/2009	1,025.21	27.98	0.00	0.00	0.00	0.00

Buying pullbacks in an uptrend

With today's (relatively) huge down day, a number of ST buy signals were triggered. They included signals from the VIX, U/D volume, and Arms Index. I'm sure these will be mentioned or discussed elsewhere, so what i wanted to do instead was focus on a slightly different signal. You probably have heard many technicians argue that you should buy pull backs in an uptrend. What they may not define however is what constitutes a 'pullback' and a 'trend'. I will suggest it is a 2%+ one day decline while trading above the 200ma. Had you bought ever such pullback in the S&P 500 during the last decade, you would have traded 25 times, with 21 cases (or 84%) providing a positive return within the next 3 days.

(Note: column '3Day+' displays the number of days it took the S&P to close higher within the next 3 days. a value of 0 indicates the market did not close lower within 3 days)

Ticker	Date/Time	Close	3Day+	%Chg N1	%Chg N2	%Chg N3
SP500	2/9/1999	1,216.14	1.00	0.61	3.12	1.15
SP500	3/23/1999	1,262.14	1.00	0.51	2.21	1.64
SP500	4/19/1999	1,289.48	1.00	1.29	3.62	5.38
SP500	5/14/1999	1,337.80	1.00	0.13	-0.33	0.48
SP500	7/20/1999	1,377.10	1.00	0.16	-1.17	-1.46
SP500	9/21/1999	1,307.58	1.00	0.22	-2.08	-2.31
SP500	1/4/2000	1,399.42	1.00	0.19	0.29	3.00
SP500	1/24/2000	1,401.53	1.00	0.61	0.18	-0.21
SP500	1/28/2000	1,360.16	1.00	2.52	3.61	3.60
SP500	2/9/2000	1,411.71	1.00	0.36	-1.74	-1.54
SP500	2/11/2000	1,387.12	1.00	0.20	1.08	0.04
SP500	4/12/2000	1,467.17	0.00	-1.82	-7.54	-4.48
SP500	5/3/2000	1,415.10	2.00	-0.39	1.24	0.64
SP500	5/19/2000	1,406.95	0.00	-0.44	-2.35	-0.56
SP500	5/19/2003	920.77	2.00	-0.11	0.29	1.21
SP500	2/27/2007	1,399.04	1.00	0.56	0.30	-0.85
SP500	3/13/2007	1,377.95	1.00	0.67	1.04	0.65
SP500	7/26/2007	1,482.66	0.00	-1.60	-0.59	-1.85
SP500	8/9/2007	1,453.09	1.00	0.04	-0.01	-1.83
SP500	10/19/2007	1,500.63	1.00	0.38	1.26	1.02
SP500	11/1/2007	1,508.44	1.00	0.08	-0.42	0.78
SP500	6/15/2009	923.72	0.00	-1.27	-1.41	-0.58
SP500	7/2/2009	896.42	1.00	0.26	-1.72	-1.88
SP500	8/17/2009	979.73	1.00	1.01	1.71	2.82
SP500	9/1/2009	998.04	2.00	-0.33	0.52	1.84
SP500	10/1/2009	1,029.85	0.00	0.00	0.00	0.00

CBOE Put/Call spike signals ST Buy

Today we saw a significant spike in the CBOE P/C ratio, closing at 1.12. I looked back over the past decade for similar occurrences, where the ratio closed above 1.1. There were 140 since 1/1/1999. In 112 cases, or 80% of the time, the S&P 500 closed higher within three days. The table below shows the last 43 instances, from 2008 to present.

(Note: column '3Day+' displays the number of days it took the S&P to close higher within the next 3 days. a value of 0 indicates the market did not close lower within 3 days)

Ticker	Date/Time	Close	p/c	3Day+	%Chg N1	%Chg N2	%Chg N3
SP500	1/2/2008	1,447.16	1.165	0.00	0.00	-2.46	-2.14
SP500	1/4/2008	1,411.63	1.123	1.00	0.32	-1.52	-0.18
SP500	1/8/2008	1,390.19	1.375	1.00	1.36	2.17	0.78
SP500	1/15/2008	1,380.95	1.250	0.00	-0.56	-3.45	-4.04
SP500	2/5/2008	1,336.64	1.141	2.00	-0.76	0.02	-0.40
SP500	2/7/2008	1,336.91	1.131	2.00	-0.42	0.17	0.89
SP500	2/12/2008	1,348.86	1.138	1.00	1.36	0.00	0.08
SP500	2/15/2008	1,349.99	1.157	2.00	-0.09	0.74	-0.55
SP500	2/22/2008	1,353.11	1.147	1.00	1.38	2.08	1.99
SP500	2/28/2008	1,367.68	1.237	0.00	-2.71	-2.66	-2.99
SP500	3/19/2008	1,298.42	1.207	1.00	2.39	3.96	4.20
SP500	3/27/2008	1,325.76	1.125	3.00	-0.80	-0.23	3.35
SP500	4/4/2008	1,370.40	1.203	1.00	0.16	-0.35	-1.16
SP500	4/8/2008	1,365.54	1.137	0.00	-0.81	-0.37	-2.40
SP500	4/11/2008	1,332.83	1.290	2.00	-0.34	0.12	2.39
SP500	5/21/2008	1,390.71	1.182	1.00	0.26	-1.06	-0.39
SP500	6/3/2008	1,377.65	1.139	2.00	-0.03	1.92	-1.23
SP500	6/6/2008	1,360.68	1.146	1.00	0.08	-0.16	-1.85
SP500	6/11/2008	1,335.49	1.140	1.00	0.33	1.84	1.85
SP500	6/18/2008	1,337.81	1.121	1.00	0.38	-1.49	-1.48
SP500	6/20/2008	1,317.93	1.329	1.00	0.01	-0.28	0.31
SP500	6/26/2008	1,283.15	1.142	3.00	-0.37	-0.25	0.14
SP500	7/3/2008	1,262.90	1.204	2.00	-0.84	0.86	-1.44
SP500	7/11/2008	1,239.49	1.149	3.00	-0.90	-1.98	0.47
SP500	8/19/2008	1,266.69	1.132	1.00	0.62	0.87	2.01
SP500	8/25/2008	1,266.84	1.120	1.00	0.37	1.17	2.67
SP500	9/9/2008	1,224.51	1.113	1.00	0.61	2.00	2.22
SP500	9/15/2008	1,192.70	1.469	1.00	1.75	-3.04	1.16
SP500	9/29/2008	1,106.42	1.377	1.00	5.42	4.94	0.71
SP500	10/2/2008	1,114.28	1.366	0.00	-1.35	-5.15	-10.59
SP500	10/8/2008	984.94	1.181	3.00	-7.62	-8.70	1.87
SP500	10/15/2008	907.84	1.124	1.00	4.25	3.60	8.54
SP500	10/22/2008	896.78	1.217	1.00	1.26	-2.23	-5.34
SP500	11/6/2008	904.88	1.333	1.00	2.89	1.58	-0.66
SP500	11/10/2008	919.21	1.106	0.00	-2.20	-7.28	-0.86
SP500	11/19/2008	806.58	1.411	3.00	-6.71	-0.81	5.61
SP500	1/7/2009	906.65	1.142	1.00	0.34	-1.80	-4.01
SP500	1/12/2009	870.26	1.155	1.00	0.18	-3.18	-3.05
SP500	1/14/2009	842.62	1.147	1.00	0.13	0.89	-4.44
SP500	2/18/2009	788.42	1.181	0.00	-1.20	-2.33	-5.72
SP500	3/30/2009	787.53	1.136	1.00	1.31	2.99	5.95
SP500	6/17/2009	910.71	1.135	1.00	0.84	1.16	-1.94
SP500	9/30/2009	1,057.08	1.118	0.00	0.00	0.00	0.00

This suggests that any dip below 1057 may be a short term buying opportunity.