If you are a trader, particularly trading the ES, or spoos, you know how the intraday market often takes you right out of a trade executed at the wrong time. You expected a short trade and you were right but you got in too early. A common problem for all traders. What if there was a way to know if the market was moving in your favor before you executed? We think there is. And it is primarily dependent on reading both the trin and the vix. Consider this premise.
If there was an effective way to know whether a trend has started on the trin, would it necessarily mean the same trend had started on the vix? Not at all. Unless both the trin and vix have ended an existing trend, trading against either one could easily result in losses. We have developed a time tested method for determining when a trend exists as well as a means for determining targets for when it will end. And we have developed a complete consistently profitable strategy around it.
We are sharing our logic here for the first time anywhere.
When using a 1 minute chart, the trin and vix moves in small increments measured to the 2nd decimal point (1/100th). To illustrate the idea we will just talk about the trin although the basic idea applies also to the vix. The first issue, however, is to determine what part of the bar you are looking at. We believe the high of the trin and vix corresponds with the low of the spoos. The converse is also true. Also forget all the preconceived ideas about what is bullish or bearish. The trin can be at 3.4 and move down to 1.9 and you can see a heck of a rally in the process.
Presuming that the trin has established a pivot in the opposite direction, if a trend is being established look for the following.
The trin should move from the current 1/10th decimal point in to a new 1/10 decimal point. ei
current reading 1.15 and going up. To be trending, the trin must move in to 1.2X at least. Trin must not have been less than 1.15 when you start tracking it. Also, if the trin moves lower than 1.15, the up trend probably has not started and you need to keep watching. But once it starts to move, it WILL move in to the next 1/10 decimal point and likely will continue in to the 1.3X or 1.4X or more. Thus the trend has started and trading with the trend will produce successful trades.
Another compelling factor, however, is the existence of gaps in the trin and vix. We define a gap this way. If the close of the preceding one minute bar is not intersected by any portion of the current bar, a gap exists. Equally important is if the high of the current bar has not intersected the close of the previous bar you have a gap that suggests the index will move UP to fill the gap, hence resulting in a corresponding drop in the spoos when the gap is filled. If the low of the current bar does not intersect the previous bar, the index will move down to fill the gap, resulting in a corresponding move up in the spoos when the gap is filled. Gaps of any size in the trin are always filled. Gaps in the vix of less than .05 may not be filled. We have the data to prove this. So if you know where these gaps are, if the current reading is in general proximity to a known gap, holding the trade until the gap is filled can be enormously profitable.
We invite you to explore these concepts on your own or if you want to see specific results check out our website or write to us for examples of any given historical date and we will provide you with the data.
