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Navigating the Low VIX Markets

Posted by David Bean on

Last Friday, the markets markets had a nice rally into the close that quietly moved the E-mini S&P higher and closed at 2399.00 (based on the 24 hour session ending at 17:00). I was disappointed that none of my e-mini S&P strategies went long with the current settings. I studied this over the weekend to find a strategy that would consistently take advantage of this type of this type of price action as I see this more and more. Here is what I found...
Lately, the markets seem to go up very slowly and quietly as long as there are no traditional buy signals. The concept of buying a quiet market if there is no buy signal is one of the ideas I wanted to research. Other ideas include, buying the market if there is a sell signal or buying the market on the close (to hold for an overnight gap up) if your day trade strategies are long and the market isn't going down but it "won't move" higher (almost as if it wants to prevent you from making profits). Many times you see the market gap up the following day to your previous day's anticipated profit target.
I don't know if you remember the Wall Street film from 1987 with Michael Douglas and Charlie Sheen, directed by Oliver Stone. At one point in the movie after Bud Fox played by Charlie Sheen gives Gordon Gecko (played by Michael Douglas) some inside information. Gordon Gecko decides to buy the stock in the offshore accounts and to "keep it quiet".
Over the years, the markets would start a trend. In more active markets with higher volatility and daily trends, you can enter a trade based on this observation and catch part of this trend. With this low VIX environment, many typical trading signals do not show up or once they do show, the trend is over.
Having this sort of insight will allow you to adjust your strategies or develop new strategies. We do both in the video below. We first look at a new strategy that has worked well the last two years in the E-mini S&P and the last three years in the E-mini Nasdaq. The strategy was developed over the weekend so that it would have captured Friday's moves (as well as many other moves) and then captured yesterday's trades in the E-mini S&P and E-mini Nasdaq.
The second way to capture these moves is to bias your strategy so that it is more likely to take long trades than short trades. We go over this in detail for Tick Pulse in the video.
The lowest monthly VIX reading since 1990 is 8.89 and the second lowest VIX reading is 9.39. Today's low is 9.56.

This new strategy is called LVTDL Stock Indexes

LVTDL Stock Indexes

We will have a complete page for this strategy soon. Email us with questions.

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