As pictured below, equity indexes have been highly range-bound since the end of April. That trading range has been between about 470 and 510 in the Russell 2000, and 865 and 930 in the S&P 500. I doubt that this range is likely to persist for much longer. Fans of technical analysis will note that SPX and RUT are caught in the narrow space between their respective 50- and 200-day moving averages: a break above or below either average…
Monday, April 6, 2009
With last week’s choppy, news-driven trading, the signals we were getting from our short-term indicators were either valid for only a very short time, or were short-circuited entirely. The area we called “The Zone” clearly was at the center of a region of major contention between the bulls and the bears for two weeks, but it’s also clear that the boundaries defined by support and resistance back in January and February have become blurred. This week we’re again going to…
Sunday, March 22, 2009
The overbought condition we identified at the beginning of our last Weekend Update was resolved in a short-term reversal this week—but only after a wild ride higher. On Monday the S&P 500 Index backed off the 770–780 resistance zone, retested it on Tuesday and retreated Wednesday morning, then blasted through following the announcement of additional supplies for Helicopter Ben‘s Berlin Airlift of Fed dollars to an economy that remains under siege from frozen credit. From…
Wednesday, February 25, 2009
Back in December, we considered whether the VIX, despite how fundamentally different it is from an equity or commodity, might be a good candidate for technical analysis after all. We haven’t come up with any better theory as to why this might be, nor gathered empirical evidence to prove the theory we proposed at the time—i.e., that options traders implicitly trade volatility every time they decide when and what to buy and sell, making the VIX, as a…
Tuesday, February 10, 2009
One of the trading myths we noted recently has generated some questions. There seem to be some passionate proponents of applying technical analysis to leveraged ETF charts out there, and while that notion has already been debunked elsewhere, we thought we’d take a different approach, just for fun. Here’s an argument in favor of technical analysis based on support and resistance. Define “support and resistance” however you wish, as long as the definition has to do with price behavior…
Thursday, January 29, 2009
These are the top five trading myths that we would kill right now if we could. Since human brains are wired to remember often-repeated associations as true even if they’re false, we’ll state the true propositions. Technical analysis does not apply to 2x, 3x, and related inverse ETFs that track the daily changes in some underlying. You can’t trade the spot VIX; not with VIX futures, not with VIX ETNs, and not with VIX options. Credit spreads are…
Tuesday, December 16, 2008
We have our internal debates here at Condor Options (after all, group-think is a sign of an unhealthy organization), and one of them is about how much in the field of technical analysis is useful and how much is just haruspicy. Nowhere is this question more controversial than in the case of the VIX. As an index of options premium, it’s a derivative of a derivative—and despite the fact that you can trade the VIX, indirectly,…
Monday, November 17, 2008
Perennial debates about the value of fundamental vs. technical vs. quantitative analysis are missing the point. The only valid school of analysis is the objective kind. Consider some of the feel-good subjective components that have adulterated each approach: Fundamental analysis: any valuation based on growth estimates is suspect. And you don’t need us to remind you of the dismal record of bright young sell-side analysts when it comes to pricing stocks. Picking strong companies with stable earnings trading at…
Tuesday, September 2, 2008
One reason we are constantly on the hunt for new strategies is that humans, as a species, have a really hard time functioning outside of our cognitive biases. Biases aren’t necessarily a moral failing – they’re not a failing at all, when you really think about some of them. Maybe confirmation bias is a tendency that was selected for among our distant ancestors because individuals with the disposition to make some rough, if somewhat unjustified inferences were better…
Thursday, June 26, 2008
On a day like this, you really need to start off any post with some good news. Apparently, one of the greatest television shows of our time might be made into a movie: we’re talking about Arrested Development. So you see, there is hope for this country after all. (Nevermind that we’re all so scared of the boogeyman that the government will be warrantlessly watching the movie over our shoulders; that’s a matter for another day.) Okay, now…
Jared Woodard is a registered commodity trading advisor who specializes in trading volatility as an asset class. With over a decade of experience trading options, futures ... Read More
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Friday, May 29, 2009
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