Knowledge can counter a host of fears. It's the Unknown, the 'fear of the dark', that causes us to step back and hesitate and, there's no better place to look than the Markets for a source of that fear of the unknown. "Is the Market Crashing?"; "Is This the End of the World?", etc., etc.. Common fears all.
What if we could KNOW with good certainty just what kind of psychological condition the mass of investors were presently in? Couldn't that also be another valuable tool in our trading toolbox?
Undoubtedly yes. Well, when it comes to the Stock Market conditions in the US, we can use one tool called the VIX (volatility Index) to shed some valuable light on the present mindset of the trading crowd.
When the S&P 500 Stock Index is compared on a time synchronized basis with the VIX index, we find a mirror-image of the Stock Market reflected in the VIX chart. Actually, I prefer to call VIX the 'FEAR INDEX' as it more suits it's most valuable use to me in determining the conditions that are prevalent in the Stock Market NOW.
What's Today's Market Conditions? For quite some time when the Market was climbing, price oscillated within a 'Normal Zone' where traders were relatively confident in the trading conditions and the Market in general. But, once we passed a certain time point in December, Panic set in that grew greater as the month progressed peaking near the end of December.
You can see this clearly in the above chart. However, after reaching the 'MAX FEAR' Point, confidence has been gradually increasing in those who are the most active traders until it has now reached a point where the 'NORMAL PARAMETERS' were located before.
As I said in my previous post, it takes Great Courage to put on a trade while all around you may be shaking their heads or making nay-saying comments. But, with the VIX as another of our confidence-building tools, we can better sense what the institutional traders attitude is and, that is positive and growing more confident daily.
This information hasn't migrated down to the average investor as yet, and, probably won't until a top is ready to be put in. The exact worst time to enter!
Always remember that Trading is a Business, and, that those in that Business intend to make a profit and the only people they can make a profit off from most easily are average traders like yourself.
Use this tool to know what's really going on out there and, disregard any media that disagrees with the VIX Fear Index. You'll likely find yourself in much better trading company and a more profitable group. - George
Contact: George@wdgann-lost-secrets.com with your quote requests and comments. Your input is greatly valued and appreciated. ~ George ~