The summary: Stocks fell ("Faded"?) out of the main upward channel. Bulls can hang there hats on the ATR that has not confirmed a reversal.
Chart shows the mean of 3 US stock indexes divided by their respective volatility index: SPX / VIX , NDQ / VXN , DJA / VXD. This is one approach to putting all 3 on a single scale and is conceptually similar to Z-score, Sharpe ration and Normalization, to name a few**
Getting all 3 on the same scale is useful for both comparison and, as in the present chart, aggregation.
(SPX appears above on top for reference.)
Summary:
Last session "stocks" fell out of the main upward channel.
They have also fallen bellow the long term median (red dots).
However, there are bullish features as well:
ATR indicator: Typically inverse stocks Were *not* seeing the same "break out" (added Regression channel +/-2STD)
It is not yet in free fall and there's plenty of structure to the left for support and pullbacks.
Notes:
** There are issues with taking the mean of any of these statistics. For example two Zscores of 0 and 3. It's true that their mean is 1.5 but there are very few valid conclusions one can draw from that outcome. It will have a "smoothing" effect (mean reversion) which is not entirely
undesirable for our purposes.
Chart shows the mean of 3 US stock indexes divided by their respective volatility index: SPX / VIX , NDQ / VXN , DJA / VXD. This is one approach to putting all 3 on a single scale and is conceptually similar to Z-score, Sharpe ration and Normalization, to name a few**
Getting all 3 on the same scale is useful for both comparison and, as in the present chart, aggregation.
(SPX appears above on top for reference.)
Summary:
Last session "stocks" fell out of the main upward channel.
They have also fallen bellow the long term median (red dots).
However, there are bullish features as well:
ATR indicator: Typically inverse stocks Were *not* seeing the same "break out" (added Regression channel +/-2STD)
It is not yet in free fall and there's plenty of structure to the left for support and pullbacks.
Notes:
** There are issues with taking the mean of any of these statistics. For example two Zscores of 0 and 3. It's true that their mean is 1.5 but there are very few valid conclusions one can draw from that outcome. It will have a "smoothing" effect (mean reversion) which is not entirely
undesirable for our purposes.
