Lessons

1. If VIX is under 26, buy the dip. If VIX is over 26, sell the rip.

2. Always trade in the direction of the larger trend. Find the strongest trend in your time period.

3. Nothing as bearish as a failed breakout. Nothing as bullish as a failed break down.

4. Don't worry about the last dollar. Take your money and go to the beach!

5. No more than four positions at a time. Preferably 2-4. Scope out others. Pick the strongest.

6. Buy the strongest; sell (short) the weakest.

7. Nothing is guaranteed. Nothing.

Saturday, July 16, 2011

RSP:SPX

I think in Wave5, as breath thins, it is natural for RSP (equal weighted SP500) to trail the S&P. The RSP:SPX chart looks ghastly right now. If you look at it in isolation, with MACD, you'll see a declining channel. However, IMHO, what you see is quite common in the beginning of Wave 5. To see a complete Wave 5 comparison of RSP:SPY and SPX, look at this chart, from 2005 to 2008:


Note that RSP:SPX peaked in around March 2007 and the October highs in the SPX didn't even make a dent in RSP:SPX ratio.

Now look at the same chart for the past 2 years.
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)