OK hopefully I can get the attribution right on this. Bill Luby at Vix and More has a post up that studies a possible timing tool using a ratio of the S&P 500 and the BuyWrite Index (BXM). Basically when it gets to 1.80 the S&P 500 turns down.You can read Bill's post here (and by the way the chart is Bill's too). I found out about this from the Daily Options Report and Adam weighs in with a little more on the subject too.
The utility to something like this helps to create better understanding of market dynamics. There are relationships between different markets that have varying levels of importance but to the extent that we learn from them; all the better.
2 comments:
Goefert has written about the BXM but I can't seem to find the article. I don't believe he uses the SPX/BXM ratio though.
I just added another small hedge position - this time UVPIX (Emerging Ultra Short). I'm still 100% long but short term I expect some weakness and I want to offset my leveraged positions. I haven't done the math yet but I'm probably below 100% long at this point.
As side note, I just looked at my 4 year returns from my 401k plan since it was switched over to new new administrator on 5/03. My average annualized return over the past four years was 17.68%. I'm pleased given that I have frequently held very high cash positions. I wish they could report standard deviation. Obviously I don't expect my long term average returns to be anywhere near that high. We've been in a bear market if you haven't noticed.
correction...we've been in a BULL market
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