Wednesday, June 15, 2016

Ready For the BIG One?...06.15.16

So the BREXIT deal has got the markets spooked big time...and probably with good reason. Fortunes will be made or lost following the June 23rd vote and trying to find an edge or a half way reasonable hedge is consuming many traders' energy. I've got some ideas of that and will put in my two cents over the weekend.
Until then here's a little study of old time Bollinger Bands applied to the VIX, SPY and XIV (inverse XIV ETN).  These studies came to light in a recent Schwab bi-weekly technical study group and suggest that there may be a nice odds forecast hidden in the path of the bands.  Bollinger bands have been around for decades of course and some folks swear by them and others swear at them...but, like any technical indicator, if properly configured and applied the results may be useful to your bottom line. These are NOT short term indicators and as shown cover 109 days of daily bars.
The RSI2 is shown in a separate chart window for reference and signal confirmation.
The VIX and XIV chart s are set to 2 standard deviations and a 14 day MA, the SPY chart is set to 1.5 standard deviations and 14 days MA.  The band violation signals are few but the reliability of those signals is very high.  We can nuance these studies further by honing in on shorter intervals such as 130 minutes and we'll post a couple of these later this week FYI.
Note the recent  signals in all three charts.

Charts courtesy of Schwab,,, StreetSmart Edge platform.