The VIX as an indicator
Another indicator that traders use is the VIX. You can read the details about the VIX here.
The VIX is a measure of market volatility. The saying goes "When the VIX is high, you buy, when the VIX is low, you go." "High" on the VIX is usually considered above 30. Low is below 20.
In general, if the VIX is above 30 the market is in panic mode and this indicates an opportunity to get in when prices are low.
If the VIX is below 20, it indicates that the market is complacent and that a sell-off may be happening soon.
Despite the recent sell off, we still aren't in a panic mode yet. I would wait until the VIX moves above 30 before getting too aggressive in this market.
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2 comments:
Scott, not trying to nitpick, but your last post said we were oversold, and this post says we are not.
I'm just trying to point out that most indicators are in conflict most of the time, and can cause analysis paralysis if you don't have a clear strategy.
You're right. Like I've said in other posts, the more indicators I use, the worse I do. Market timing doesn't work for my type of stock screening and even though I KNOW that, I still continually look for that "holy grail" indicator that will tell me when to be in and when to get out. I hope I haven't confused people with those indicators, I was just trying to do a little educating, but I wholeheartedly agree that indicators can wreck your strategy.
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