This thread is just for fun and to test the VIX buy/sell signal I read about a few years ago. The signal and trigger has three main steps or criteria to it. You need a daily chart of the VIX (Volatility Index) with the default bollinger bands.
1. First off your looking for a VIX candle to close outside of the bollinger bands. I seem to notice the signal is even more effective if you can get an entire candle body to form outside of the lines (both open and closing prices).
2. Once you get the candle that closes outside of the bands, then the actual signal doesn't form until you get a candle to close back inside the bands.
3. Once you have the signal, the final thing to look for is the trigger. Wherever the VIX closed back inside of the bands from step 2, that's the trigger line, and basically you're just looking for the next VIX that closes past that line.
I probably did a poor job of explaining the signal and trigger, but once you get the concept it's very easy. Yesterday's (March 13) VIX candle did indeed close below the lower bollinger band, and in fact it also opened below it as well. That's a good way to check off the first step in the checklist, with the entire candle body forming below the lower line. Today the VIX is looking strong and at the moment is trading back inside of the bands, so I'll be keeping my eye on it and see where it finishes the day. It may not be today, but basically I'm watching to see the next solid close back above the lower line. Once we get that close back inside the bands, then the last thing to do will be to wait for the trigger (a VIX close higher than the first close back inside the bands).
So right now we're in the process of seeing if we'll get a VIX buy signal, which is a signal to sell the broad market (volatility and bearish moves tend to go hand in hand). Depending on when or if this signal sets up successfully any time soon, I'll keep this thread updated and we'll see how market responds. I like that the markets are slightly green but the VIX is chugging along nicely, we'll see if that's a sign of weakness to come.