StockFetcher Forums · General Discussion · Interesting - VXX:SPY ratio works on any time-frame<< 1 2 3 >>Post Follow-up
guspenskiy13
976 posts
msg #119404
Ignore guspenskiy13
5/6/2014 10:25:35 PM

This is really a continuation of work by Kevin, Bartune1 and other members of SF community that I have tweaked a bit.

Here are the original threads:
http://www.stockfetcher.com/forums/Filter-Exchange/Interesting-VXX-SPY-ratio-accurately-calls-recent-tops-and-bottoms/92678

http://www.stockfetcher.com/forums/General-Discussion/VIX-variance-vs-10-day-moving-average/78683/0

___________________________

I have recently discovered this interesting observation about VXX/SPY ratio and how it calls tops/bottom for S&P 500.

I liked the performance - but I didn't like the time-frame. Everyone used it on a daily 6-9 month chart, which is not too suitable for day-trading.

I went to TOS Prophet charts - which allowed me to stream the ratio with its moving average and to use other technical indicators as well. (TOS Prophet is really nice for that - any time-frame, any aggregation period. For free.)

I tried every single time-frame to figure out, which would work the best for my needs. (I typically hold from 1 minute to 2 hours...so)

The following is the best combination that I have used so far. I wish I could make it perfect - maybe someone could help me with that.
_____________________________
Aggregation period: 4 minutes
EMA(11)
BBEMA(11, 1.4)
MAE(11, 0.4)
ROC(9)
RSIS(14)

I used exponential instead of simple averages for everything - seemed to be clearer on this short time-frame.
EMA,BB,ROC - I took that from Kevin, length similar to what he used as well. 1.4/0.4 - eyeballed.

MAE - I like to see the relationship between the BB width and envelopes width - but it is unnecessary.

RSIS - it gives me another edge (at least I think so), because there are times when both ROC/cross fake-out.

Prophet (VXX)/(SPY) chart (5/6/2014):
Image and video hosting by TinyPic

TOS (SPY) chart (5/6/2014):
Image and video hosting by TinyPic

Pretty self-explanatory:

This was a gap-down; I will have another picture later. Some people might trade right off the open - I prefer to wait for a confirmation.

1st signal (buy) - confirmation from every single indicator, as ROC/RSIS crosses occur at the same time. I like that BB squeeze too.

2nd signal (sell/short) - wasn't confirmed by the ROC right away, but the trendline was broken. I think that trendlines on ROC are pretty useful - you might get that from the chart....

3rd signal (cover/buy) - with swings ROC has a hard time to turn right away - that's why we use RSIS. You could use that spike over BB/MAE to cover and buy - but that's more aggressive.

4th signal (sell/short) - notice that BB SQUEEZE! And steadily grinding upwards ROC......30 minutes later the BB's expand and get larger than MAE - crazy price action and crazy accurate signal.

5th signal (cover) - self-explanatory.

Other signals that I haven't mentioned - during the last 1.5 h of the trading day the signals didn't qualify either because of RSIS or ROC, but most importantly because of common sense.

As a good rule of thumb - the signal has better odds, if it touched BB's prior to cross.

I love ROC trends and I love BB's squeezes/expansions. The whole day could be described as: expansion, squeeze, expansion, squeeze, HUGE expansion.

I do believe that you can trade just this and be fine...however, I think I get better odds with this:
Image and video hosting by TinyPic

And two more time-frames plus NDX with Fibonacci Retracements on all major moves.

I hope someone would find this useful...or at least interesting.




guspenskiy13
976 posts
msg #119458
Ignore guspenskiy13
5/7/2014 9:27:07 PM

Today I will get into more detail about interpreting the signals that this set-up produces.
Image and video hosting by TinyPic
Image and video hosting by TinyPic


I will try to be informative; this is the trading day 5/7/14 SPY chart with (VXX)/(SPY) chart.

1. First of all, both ROC and RSIS are used with trendlines. Pretty self-explanatory; I've marked them on the chart - they have a meaning if you check it out.

2. We want our RSIS(14) to be either at 1 (bearish signals) or 0 (bullish signals). It's important to see how much time it spends in either of those zones; I've marked them with PURPLE ovals. I believe that when RSIS crosses through 0.25/0.75 is more important, than 0.5 cross.

3. We pay close attention to the relationship of BB's to MAE's; to SQUEEZES and EXPANSIONS. When BB's squeeze - they tend to expand after and in reverse. This used with climbing ROC/RSIS and EMA cross is a pretty strong signal of a strong move coming. Today there were 4 BB's squeezes/expansions - I've marked them with WHITE RECTANGLES.

4. (VXX)/(SPY) tends to get out of the boundaries established by BB/MAE on strong moves. More often than not those moves happen to be UNSUSTAINABLE. We do like when the ratio is outside of the bands/envelopes - but we pay close attention to them, when they come back into the range. Sometimes it might be an early sign of a reversal, sometimes it is just a quick correction. When used with other indicators it becomes meaningful - I've marked 5 times the ratio was outside of the boundaries by RED CIRCLES.

5. Technical analysis is an art and this is a technical analysis tool; like any other it could be used by itself, but it would be more effective in combination. I personally use two 1-minute time-frames for both QQQ/SPY with all possible trend-lines/resistances/pivots/supports, with Fibonacci retracements and Fans for every major move and RSI(7), where I build trend-lines as well; EMA(150) finishes this set-up.
_________________________________________________________________________________________________________
EXPLANATIONS:

1. Buy/Sell signals

For buy/sell signals anticipation I want a confirmation from ROC/RSIS. Sometimes it's not a cross through 0/0.5 - but rather trend-line break or a sign of weakness. As I mentioned before - the strongest signals occur when (VXX)/(SPY) gets out of the boundaries established by BB's/MAE's; those tend to be extremely high-probability trades.

(1) -SHORT- fading the gap, all confirmations, bb's squeeze prior to the expansion

(2) -COVER/BUY- clear signal, ROC doesn't confirm but breaks trend

(3) - SELL/SHORT- the first signal had no confirmation so we stayed with the position

(4) -COVER/BUY- bb's squeeze and we reverse on the confirmed signal - can't really call this a fake-out, as both signals were confirmed.

(5) -SELL/SHORT- no comments

(6) -COVER/BUY- no comments

(7) -SELL/SHORT- first signal was a fake-out, this one is confirmed.

(8) -COVER/BUY - doesn't get confirmed by ROC right away - but ROC descending. Not too clear.

(9) -SELL/SHORT - tiny signal, but confirmed. Super squeeze, ROC flat.

(10) -COVER/BUY - signal is taken after ROC makes a cross.
____________________________________________________

2. BB's squeezes

Important signals that I've marked with white rectangles that signal decreased volatility and possible momentum change. #3 got extended because of the time (12 to 2 pm) and correction.

_____________________________________________________

3. Extreme deviation

We have BB's and MAE's as deviation measurements. When ratio gets out of BB's/MAE's boundaries, that indicates a strong move. As long as the ratio is outside of the boundaries - we are good. When it comes back - it might be either a small correction or a reversal. Today, EVERY single time extreme deviation occurred (ratio is outside of both BB/MAE or touches both) it was a sign of reversal. This is definitely something you want to pay attention to.

#5 - extreme deviation, signaled dead BOTTOM

#6 - showed the TOP of the move before SPY went into deeper correction

#7 - showed the TOP of the move

#8 - BOTTOM of the correction

#9 - BOTTOM of the correction

Pretty nice, isn't it?



jackmack
334 posts
msg #119463
Ignore jackmack
5/8/2014 9:17:09 AM

I very much like this - thank you for sharing
Not a day trader though - more of a swing trader
Do you have a recommendation for a longer time period set up
that would fit into days and not hours?
Thank you again for sharing this as it is VERY NICE indeed.
Cheers

guspenskiy13
976 posts
msg #119530
Ignore guspenskiy13
modified
5/8/2014 4:04:15 PM

"5/6/2014 10:25:35 PM

This is really a continuation of work by Kevin, Bartune1 and other members of SF community that I have tweaked a bit.

Here are the original threads:
http://www.stockfetcher.com/forums/Filter-Exchange/Interesting-VXX-SPY-ratio-accurately-calls-recent-tops-and-bottoms/92678

http://www.stockfetcher.com/forums/General-Discussion/VIX-variance-vs-10-day-moving-average/78683/0 "

Use those two links for longer time-frame set up. You can also try and tweak things around in TOS Prophet chart to get a time-frame for days. However, I can't say anything whether it would be effective or not.

Let me know here if something works that you try.

klynn55
425 posts
msg #119532
Ignore klynn55
5/8/2014 4:14:30 PM

gus, thanks , a little clarification please, what is MAE and RSIS? think or swim hybrid indicators?

guspenskiy13
976 posts
msg #119534
Ignore guspenskiy13
5/8/2014 5:30:02 PM

Thanks for the input, let me know if you've tried something and if something works for you.

RSIS = Stochastic RSI

MAE - Moving Average Envelopes.

I will post today's trading day...with LIVE screenshots of the action...soon...pretty educational!

guspenskiy13
976 posts
msg #119535
Ignore guspenskiy13
5/8/2014 7:07:56 PM

Here are signals that ratio generated today.
Image and video hosting by TinyPic
Image and video hosting by TinyPic

__________________________

To make the best explanation possible of how to use it and what to look for + some additional info,

I've made an album where I posted my LIVE screenshots of the (VXX)/(SPY), SPY and QQQ with some comments.

Use this link: http://tinypic.com/a/34epz/2

To look at the screenshots in the right order you will need to click on the little window "sort" at the right from my album name "VXX/SPY" and choose "Oldest to Newest". This will give you the right order of my little educational slides.

After that, click on the first picture and in order to go to the next one, you will need to click "previous".....since that web-site doesn't let me to sort the pics myself and you are looking at the album from the last picture to the first.

I hope that wasn't too complicated.


guspenskiy13
976 posts
msg #119822
Ignore guspenskiy13
5/15/2014 1:00:42 AM

I was tired by prophet charts....they lag too much really....so I've worked a bit and made this....INTERESTING....

Image and video hosting by TinyPic

guspenskiy13
976 posts
msg #119825
Ignore guspenskiy13
5/15/2014 1:41:52 AM

5/10 for some killer results

Image and video hosting by TinyPic

guspenskiy13
976 posts
msg #119907
Ignore guspenskiy13
modified
5/16/2014 6:03:32 PM

VXX/SPY Ratio with MA/BB's TOS script:

declare lower;
input price = FundamentalType.CLOSE;
input SPY = "SPY";
input VXX = "VXX";
input length = 9;
input displace = 0;
input crossingType = {default above, below};
def price1 = Fundamental(price, SPY);
def price2 = Fundamental(price, VXX);
plot Relation = if price2 == 0 then Double.NaN else price2 / price1;
Relation.SetDefaultColor(GetColor(1));
plot Avg = Average(Relation[-displace], length);
Avg.SetDefaultColor(GetColor(5));
input symbol = {default "VXX/SPY"} ;
input lengthBB = 20;
input Num_Dev_Dn = -2.0;
input Num_Dev_up = 2.0;
def sDev = StDev(data = Relation, length = lengthBB);
plot MidLine = Average(data = Relation, length = lengthBB);
plot LowerBand = MidLine + Num_Dev_Dn * sDev;
plot UpperBand = MidLine + Num_Dev_up * sDev;
LowerBand.SetDefaultColor(GetColor(0));
MidLine.SetDefaultColor(GetColor(1));
UpperBand.SetDefaultColor(GetColor(5));

__________________________________

VXX/SPY ROC TOS script:

declare lower;
input SPY = "SPY";
input VXX = "VXX";
input price = FundamentalType.CLOSE;
input length = 14;
input colorNormLength = 14;
def price1 = Fundamental(price, SPY);
def price2 = Fundamental(price, VXX);
assert(length > 0, "'length' must be positive: " + length);
plot Relation = if price2 == 0 then Double.NaN else price2 / price1;
plot ROC = if Relation[length] != 0 then (Relation / Relation[length] - 1) * 100 else 0;
plot ZeroLine = 0;


P.S.
I didn't quite figure out why.... but the CHART you use these indicator on....MATTERS.

I personally like to put it on VXX...best readings... with HA candles - I believe that gives me another edge....and provide some earlier reasonable exits...

I have two charts....2 and 4 minute ones...

Currently working on implementing Heikin Ashi Candles Oscillator ... and some other pretty exciting stuff...

setup:
Image and video hosting by TinyPic

today:
Image and video hosting by TinyPic

Put some arrows for buy and sell...

1) entry on cross of ROC with 0 and ratio; you could either hold though volatility or re-entry - however ROC stays positive for the whole time

2) ROC is slow on big run-ups - that's why I have HA-candles. This doji is a clear trend break followed with the cross. This is playing it safe. If you exit with ROC cross - you give up most of your profits.

3) Two possible entries as mid-day comes. I personally think that two consecutive HA candles of the same color is a change in the trend - sometimes not right away.

4) I would enter on the third red HA candle, if waited for ROC - on the fourth. Notice the BB squeeze.

5) self-explanatory

6) Market had a pretty nice run-up into the close. If I had candlesticks, I would give up 80% of my profits.

A simple rule such as exit after second consecutive HA candle against your position....is pretty effective.

If someone wanted to play it super-safe - they could exit at red doji or green doji.

Notice how the white and purple line want to cross.....but.....they CAN'T! Pretty strong signal.
______________________________

To finish this up, sometimes I think this is all you need:

Image and video hosting by TinyPic





StockFetcher Forums · General Discussion · Interesting - VXX:SPY ratio works on any time-frame<< 1 2 3 >>Post Follow-up

*** Disclaimer *** StockFetcher.com does not endorse or suggest any of the securities which are returned in any of the searches or filters. They are provided purely for informational and research purposes. StockFetcher.com does not recommend particular securities. StockFetcher.com, Vestyl Software, L.L.C. and involved content providers shall not be liable for any errors or delays in the content, or for any actions taken based on the content.


Copyright 2016 - Vestyl Software L.L.C.Terms of Service | License | Questions or comments? Contact Us
EOD Data sources: DDFPlus & CSI Data Quotes delayed during active market hours. Delay times are at least 15 mins for NASDAQ, 20 mins for NYSE and Amex. Delayed intraday data provided by DDFPlus