RC, I hope that your question is genuine considering our past differences. I would truly like to forget those times and start fresh with you. Believe me when I say that I care about this forum and will do what I can to maintain harmony; even if that means that I must do some changing.

Anyway back to your question. On the other forum there is currently a huge discussion over this very subject and how some interpret the volatility indexes. If they do muster a bounce then to me that will mean that a direction has been settled on (Up or down) you see I do share in the opinion that these indexes can determine market direction they merely determine volatility. Indirectly I guess when you consider the current market direction then one could assemble a conclusion on a Bullish vs Bearish movement. Right now the markets have settled into a triangle pattern that has reach its zenith. All the moving averages have converged and we are at a decision point. 

It is my opinion that we will break to the upside for some Bullish action and yes we will get a bounce in the volatility indexes. I then think that after a short rally the markets will resume their downward trek and the VIX, VXO and VXN will continue a northerly direction. I do not think that we will see new highs in the volatility indexes however because the action from October to November was pretty intense; in my opinion I do not expect that type of action again. Things will move more subtly going forward I think.

Let me know if I have not answered your guestion.

Apsll.

When I say that I think that the vix will bounce when the markets do, it is because when the markets turn (one way or the other) then volatility will increase. Increased volatility is a symptom of a directional move. Which direction is not the issue? Market participation is.

I do not know if you participate on the other forum but if you do then check out the thread on the VIX Davidjohnhall Me and a few other great traders are discussing this very subject.

I do not believe in astrological events nor do I use them as a part of my analysis. I am (short term) Bullish right now just because all the major indexes are showing a familiar bullish pattern (triangle).  That and I see a lot of stocks under accumulation right now. Look at DIG and GS. 

I remember back in May and June that I was arguing with funnymoney and maybe you that the oil bubble was soon to burst and to back up my theory I pointed to the obvious accumulation in the ultra short ETF DUG. I do not say this to now brag but look what happened.

I might be getting off the subject here but I do not believe that the volatility indicators are useful for predicting market direction they are what they are. If the markets are heading down or up then I expect volatility to increase near the bottom or top and then settle down before making the final transition (up or down). We are getting that action now. All the moving averages are converging to a decision point. I think it will lead us up for a small rally (small because I know that this is not the end of the Bear market) but it could also go the other way -Down...

Here is an what one of my friends had to say about the VIX. He said that he read an article on this subject and I agree with the following words.

Yes RC you have hit upon my lack of true understanding of the volatility indexes. I know that at the heart of their mechanics is the use of derivatives. My lack of knowledge in this area disqualifies my in-depth understanding of their driving force. I can only rely on my many years of monitoring their action in reference to market shifts and volatility at critical junctures.

As far as DIG is concerned again it reminds me of the accumulation that I observed with DUG in May and June. This type of Volume and price action happens for a reason. The eventual rally with DUG was a testament to my suspicions at the time.

Nothing is for sure however and we will have to wait and see. I will concede that your technical knowledge of the volatility indexes is on more stable ground than that of my own. 

I would also like to add AGN to my list as I believe that this is a great looking bottom pattern with strong institutional support and increasing volume. There might be a small pullback to around $35 and I will buy on the bounce, or I will buy if this continues up and breaks through resistance.

Keep in mind that we are at the mercy of the markets. I have seen this befor; when I see a lot of bottoming stocks (durring a Bear market) and you thing that the markets are setting up for a temporary rally, only to see it all fall appart. So you need to watch your choices very close and use good managment and common sense.

How are you DJ, I must admit that I am only in DIG and GS right now. I post these charts for my friends. On the other forum I have also been discussing DIG and GS, I feel very strong about those two due to the obvious signs of accumulation.

I wish that I had Day traded some of the very stocks on my list but I was busy off and on today. In the past (on both forums) I have been thanked for posting my lists. I am glad that others have benefited from my past lists and I hope that some have benefited from this current one. I know the list is having great success.

To answer your question; I see stocks moving on low volume, high volume and medium volume. Yes at times I use volume in my analysis (as I did with DIG and GS) but I use it more for patterns of accumulation as opposed to volume leading price for a given rally. I think that everyone knew that the bail-outs were a given (although I was against them 100%).

RC is right about stocks like ISYS. They can be very risky or very rewarding. When I do play them I have to babysit them and I have not been able to do that lately.

With GS I have my stop set at $75 for a small loss and with DIG I have a stop at $27 for a small profit.

Lastly I do not believe in luck. I picked these stocks because of the technicals. Once in a technically sound stock then how I manage the trade will determine my profit or loss, not luck.

Please let me know if I failed to answer your questions.

Thanks Apsll.

I must concur with Tobydad. The markets were emitting Bullish pheromones for a little while now and plenty of charts were blooming. It might be short lived but the News was of no major consequence. Even if the fickle markets tumble from here (and I doubt that) the bail-out was factored in some time ago; like the impact of a microscopic meteorite the only tremors were that of the retail trader and nothing more.

Apsll your thread was directed at anyone, not just Davidjohnhall. Maverick was kind enough to test it for you and it was a valid test that noone disputed. The net profit was -4.81% in a bull market.I can only imagine how bad it would be in a bear market that you now trade in.

If you would like to see the actual trades, I can email Maverick and post them here for everyone to see. Comparing the actual test trades to your own chart is the best way, not hand picking only the trades you want to see.

Pegasis, Here is a formula that I used to find ISYS -

C1>L2ANDH>L2ANDC>O

I used to have better ones but I lost them all when I swiched venues and had to uppload Telechart from scratch. With this formula you will get a lott of hits that are not falling knifes but you will also get the falling knifes, you will just have to visually sift through them.

I will try and refine the formula.

I consulted with Maverick about your system and conveyed your concern that his data is flawed. He said that the results are in line with your rules. He uses Amibroker for backtesting and unlike most backtesting software; Amibroker will test a true portfolio. Since you did not supply enough information and in order to make it realistic he used an initial capital of $100,000 and a max of 10 positions and 10% equity for each position. He also included .01 per share brokerage fees and slippage of .10 per share. He filled in your missing information mainly to prevent the hassle with your limited knowledge of backtesting. That was an honest test that simulated what the results would be in real life if you took all the trades that matched the trading rules providing you had capital available including brokerage fees and slippage and even asked if you wanted anything changed. Your silence was considered as acceptance. I cannot believe that Davidjohnhall is unable to test such a simple system. Either you are lying about that or David just said that to keep from hurting your feelings.

To suggest that it is flawed speaks volumes about your limited knowledge of backtesting. To say I would not have taken that trade because of bla bla bla when all you had to do is include it in the set of rules. Actually your hand picked backtest trades are flawed, because you are able see the 'what if' and ignore the bad trades.

It is wrong to declare to newbie’s that you have a system that will make a lot of money when in reality it is proven from a reliable source to be a loosing system. You should be ashamed of yourself.