Optuma BlogArticles of interest & reports on trading, technical analysis, money management, and all things Optuma.
I’ve worked in the markets for nearly twenty years alongside the evolution of algorithmic trading. I witnessed the Darwinian paradigm shift it brought as those who didn’t evolve were picked off.
In the last blog, we measured bearish sentiment with the Short Interest Ratio. Another way this can be done is by using volatility indexes.
I read a great phrase this week – “Technical analysis is for-profit social psychology”. It’s certainly true that the underpinnings of the best technical indicators is investor psychology.
Last week, we delved into a longer-term moving average crossover signal on the S&P 500 that was brought to my attention. Here’s that ominous looking chart again below. At first glance it says, ”I smell a Bear!” — and no one wants to get mauled like the last two bear markets.
Is the recent 50 and 100 week moving average crossover in the S&P500 index as bad as it seems? In this article Carson takes a look at 21 occasions this has previously occurred, with some interesting results.
Market breadth is an area of technical analysis concerned with gauging the market’s health. This is done by tracking the balance between buying and selling pressure. It’s like tracking who’s winning a game of tug of war…
Last time we examined what can be gleaned from measuring fear in the market using the volatility indexes of individual stocks in the S&P 500. These implied volatility indexes revealed expectations of future volatility. The same volatility indexes are useful to gauge when market moves are at extremes.
Perhaps you’ve heard of the FEAR index? It’s not an actual index. It’s what the VIX (S&P500 Volatility Index) is also known as. And with good reason.
The VIX measures implied volatility—what is expected in the future. The reason it’s called the FEAR index is because the higher it is, the more it costs to insure the portfolio. When market participants expect or ‘foresee’ higher near-term volatility, that translates into a higher cost of protection because it costs more to insure.