Once again there was a lot of technical damage done in the market today. The advance/decline line was about 4 to 1 negative and the Nasdaq, S&P 500 and Dow were down 1.7%, 1.5% and 1.2% respectively. Much to my chagrin my 5R of early morning profit shrank to 1R as my stops got hit in that mid-day bounce. Even if I hadn't adjusted my stops I still would have made about the same amount of money so I guess I shouldn't feel too bad. It was just one of those days...
There are certainly some interesting charts out there now but very few that I'd take action on -- long or short. Its rarely a good sign when the indices close on their absolute lows of the day so I think there's still more selling to come tomorrow. But I also think it's a little late to be initiating shorts due to the potential for bargain hunters stepping in.
Here are some charts that caught my eye tonight. The two oil stocks are especially interesting to me -- looks like this sector may finally be getting tired:
...not to mention that these sharp spikes in the VIX have tended not to lead to sustained drives downward for stocks. These spikes tend to signal the late innings of a sell-off/correction.
You guys know any good books or sites talking about reading the various market indicators - VIX, A/D, etc, etc? They're interesting for me to look at, but I haven't picked up on any predictive value.
@chud,
Larry Connors is a big fan of VIX and has written extensively on it. Check out Tradingmarkets.com. You'll find stuff on it there (some free, some for a price). In fact, here's Tradingmarkets.com Rule #5:
TradingMarkets Rule 5 - Use The VIX...It Works
http://www.tradingmarkets.com/.site/AboutTM/general/tmtradingrules/07282005-44482.cfm
Oh, I forgot to add, the VIX (as of the close yesterday) was 5.86% above it's 10-day SMA.
According to Rule #5: "The TradingMarkets 5% Rule is also extremely powerful on the buy side. Since 1989, whenever the VIX has been 5% or more above its 10 day ma, the S&P 500 has achieved returns which are better than 2 1/2 to 1 compared to the average weekly returns of all weeks."
I'm not sure what "the average weekly returns of all weeks" is, but 2 1/2 times that sounds like a good thing (assuming it's positive).