Okay, how do you trade stocks using the VIX? Put this on a sticky note and paste it to your monitor. If stocks rise along with the VIX, take defensive measures.
During October once we’d past the seasonal weakness, the VIX steadily declined as stocks rallied (first blue bar). This setup is music to my ears. This relationship, VIX down and stocks up, is a dynamic where traders feel comfortable. On the flip side, when the VIX rises and stocks do as well (second and third blue bar), it’s usually time to tighten up your risk exposure. To be sure, tightening up stops or squaring positions would be a prudent move.
The chart below provides a pictorial view last week’s VIX WARNING SIGNS prior to the big drop of November 26th. Happy Thanksgiving with a textbook stock correction and 6% inflation.
Indeed, if you were to take a step back and look, you’d see the setup.
Conclusion
So, how do you trade stocks using the VIX? In short, tighten up your risk management when you see the VIX and STOCKS up at same time. Now, I’m watching to see if the SPX can recapture the 55 day moving average. Going forward, I’m still running with the hypothesis that stocks are still in a bull market. But, policy changes at the FED need to monitored closely. For now, liquidity is still abundant, so stocks can rally.
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DISCLAIMER: Content provided in this document is for your informational and entertainment purposes only. This document is not a solicitation for an investment, is not comprehensive, and should not for the basis for any investment decision. This document is not an offer to sell or a solicitation of an offer to buy any securities, commodities, or financial instruments, and my not be relied upon in connection with the purchase and sale of any instruments or interests in investment vehicles. This document should not replace professional investment advice based upon your particular situation. Duties are not assumed, intended or created by this document.
Mikehoganonline (“MHO”) strongly suggests that you obtain independent advice in relation to any investment, and with respect to any financial, legal, tax, accounting or regulatory issues resulting form such an investment. In addition, because this document is only a high-level summary: it does not contain all materials terms pertinent to an investment decision. This document should not form the basis for any investment decision. Information contained in this document has been obtained from sources that MHO believes to be reliable, however MHO make no assurance or guarantee that such information is true and/or accurate, and MHO expressly disclaims liability arising form the use of information contained herein.
This document contains statements of opinion. These statements of opinion include, but are not limited to, MHO’s analysis and views with respect to: digital assets, projected inflation, macroeconomic policy, the market adoption of digital assets (including Bitcoin and Ethereum, and Blockchain), technical and fundamental analysis, financial planning, and the market in general. Statements of opinion herein have been formulated using MHO’s experience, research, and/or analysis, however, such statements also contain elements of subjectivity and are often subjective in nature. In addition, when conducting the analyses on which it bases statements of opinion, MHO has incorporated assumptions, which in some cases may prove to be inaccurate in the future, including in certain material aspects. These analyses and opinions contained herein may be based on assumptions that if altered can change the analyses or opinions expressed. Nothing in this documents represents a guarantee of any future outcome, or any representation or warranty as to future performance of any financial instruments, credit, currency rate, digital currency or other market or economic measure. Information provided reflects MHO’s views as of the date of this document and are subject to change without notice. MHO is under no obligation to update this document, notify any recipients, or re-publish the content contained herein in the event that nay factual assertions, assumptions, forward-looking statements, or opinions are subsequently shown to be inaccurate.
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