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VXX Mechanical Trade Model

|Includes: iPath S&P 500 VIX Short-Term Futures ETN (VXX)
VXX Mechanical Trade Model

The VXX, an indicator of market volatility, is making new lows as the market goes higher. A reversal in the VXX should correspond to a reversal in the stock market. Notably, there’s a divergence forming between price and the bottom oscillator (a momentum oscillator), which means the next blip up in the index will be a (potentially tradable) buy signal. Divergences between prices and momentum oscillators precede reversals, and the technical indicators shown here are warning of a pending reversal.  - Ilene 

VXX Mechanical Trade Model

Guest author, Allan

VXX Daily
 
VXX (ETF for VIX) is a measure of market volatility, when it rises, stocks go down, when it falls, as shown on this chart, the market rises. 
 
The above chart is set up for an Advanced GET,  EW "Mechanical Buy Signal" with the bottom oscillator failing to confirm the new lows in the index.  The trigger will be a rise in the VXX sufficient to trigger a Trend Model Buy Signal.  A prior occurrence of this set up is seen on the chart in late January and it captured a brief, but tradable rise in the VXX with a corresponding decline in the markets.  

You can trade the VXX directly, or trade the underlying market indexes.  Should this signal be triggered and in light of the severely overbought market conditions,  I will be looking for leverage to Short one or more major market averages. 

*****

Allan’s newly launched newsletter, “Trend Following Trading Model,” goes along with the trading system he’s been working on for years. Most trades last for weeks to months. A special 25% discount is available for PSW readers. Click here.  For a more detailed introduction to Allan’s methods, read this introductory article.  

Disclosure: none