{"id":5818,"date":"2011-02-15T05:00:47","date_gmt":"2011-02-15T09:00:47","guid":{"rendered":"http:\/\/club.ino.com\/trading\/?p=5818"},"modified":"2011-02-14T12:11:56","modified_gmt":"2011-02-14T16:11:56","slug":"do-you-recognize-the-3-early-warning-signs-of-a-market-reversal","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2011\/02\/do-you-recognize-the-3-early-warning-signs-of-a-market-reversal\/","title":{"rendered":"Do You Recognize the 3 Early Warning Signs of a Market Reversal?"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignleft\" src=\"\/img\/sites\/ino\/email\/2466.jpg\" alt=\"\" width=\"200\" height=\"150\" \/>Today we have a special guest blogger, Price Headley of Big Trends. Price is a Traders Hall of Fame inductee and is a regular contributor on CNBC, Fox News and Bloomberg Television, and in a variety of print and online financial news outlets. Today Price will share some of his insight on a few indicators he looks for to signal a possible market reversal. Be sure to comment with your thoughts and check out Prices' new Coaching Kit at <a href=\"http:\/\/broadcast.ino.com\/redirect\/?linkid=1666\" target=\"_blank\">BigTrends<\/a>.<br \/>\n-------------------------------------------------------------------------------------------------------------------------------------------<br \/>\nIn our 20 years plus of option trading and educating investors, there are certain factors that we\u2019ve seen time and again can help foretell when the market is on the verge of a trend momentum switch.\u00a0 As part of our complimentary Coaching Kit, we are highlighting how to pinpoint market reversals \u2013 part of the Coaching Kit includes a comprehensive Market Timing course that you can use to build on today\u2019s article. <!--more--><\/p>\n<p>Beyond our innovative technical analysis indicators, we also utilize sentiment and volatility based measures that can often give us the \u201cearly warning\u201d that something may be amiss in the markets.<\/p>\n<p>The first of these is the CBOE Volatility Index (VIX), which I\u2019ve been analyzing and utilizing since the early 1990s.\u00a0 The VIX measures in the implied volatility of S&amp;P 500 Index (SPX) options \u2014 this is a factor that is basically human-controlled and has swings based on supply and demand for options.\u00a0 To a large measure, it measures the \u201cfear factor\u201d in the market among option traders.<\/p>\n<p>In recent years, VIX movements higher have tended to indicate that something is not quite right in the stock market and that large-scale selling may be imminent.\u00a0 For example, take a look at the following chart of the VIX and SPX from 2010:<\/p>\n<p>VIX &amp; SPX Daily Chart with Bollinger Band<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone\" src=\"\/\/www.bigtrends.com\/images\/stories\/Moby\/dtw120810vixa.png\" alt=\"\" width=\"529\" height=\"460\" \/><\/p>\n<p>In the above chart, you can see that the VIX (green) moved above its Top Bollinger Band (aqua bands) in April, before the market topped out.\u00a0 There was even another early warning about a week earlier where the VIX breached its Top Band but closed below it!\u00a0 Another bigger seismic move in the VIX followed at the beginning of May.\u00a0 The result:\u00a0 the stock market (SPX in yellow) dropped nearly 20% in the two months following this VIX move!<\/p>\n<p>There are two other sentiment &amp; volatility measures that we utilize to find the big market trends early on.\u00a0 One of these is Put\/Call Ratios.\u00a0 These measure the trading (mostly among the public) of option puts and calls.\u00a0 We\u2019ve designed unique indicators to track both the CBOE Equity-Only Put\/Call Ratio and the ISE Inverse Call\/Put Ratio.\u00a0 We will often see a suspicious spike in these measures before the market makes a big move \u2014 and on the inverse, there are times when these become contrarian indicators and tell us that the current trend will continue!\u00a0 Much more is available on this in the coaching kit.<\/p>\n<p>Finally, a third broad-based measure we utilize to determine whether a market trend shift is imminent or will continue and\/or strengthen \u2014 let\u2019s call this sentiment, media &amp; surveys.\u00a0 This is more of a contrarian (going against the prevailing wisdom) indicator in many cases \u2014 we\u2019ve seen countless examples of mass media panic at times of huge market bottoms and \u201cbuy stocks now\u201d type articles when a bearish trend occurs, for example.\u00a0 Remember how many articles there were about \u201ceasy money in real estate\u201d right before the bottom dropped out of that market?\u00a0 We\u2019ve seen that time and again and recognize when bubbles will burst.<\/p>\n<p>Even \u201cfading\u201d (going against) some of the online touts such as Jim Cramer can be utilized by the knowledgeable trader.\u00a0 And we know how to trade the reaction to news events, which is MORE important usually than the news event itself.\u00a0 Another example is investor sentiment surveys, such as the prominent one by Investor\u2019s Intelligence.\u00a0 This measure of bulls\/bears will often provide very good short-term contrarian signals for the markets when it reaches extremes.<\/p>\n<p>Keep an eye on the VIX, Put\/Call Ratios, and Media Sentiment\/Investor Surveys and you can often see whether the current market trend is due for a huge imminent reversal or whether you can ride the trend higher for further profits.\u00a0 For more in depth instruction on the tools and methods that I use check out our free <a href=\"http:\/\/broadcast.ino.com\/redirect\/?linkid=1666\" target=\"_blank\">BigTrends Coaching Kit available here<\/a>.<\/p>\n<p>Trade Well,<br \/>\nPrice Headley<br \/>\nBig Trends<\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>Today we have a special guest blogger, Price Headley of Big Trends. Price is a Traders Hall of Fame inductee and is a regular contributor on CNBC, Fox News and Bloomberg Television, and in a variety of print and online financial news outlets. Today Price will share some of his insight on a few indicators [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":41,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[3190,1278,882,3669,3670,3275],"class_list":["post-5818","post","type-post","status-publish","format-standard","hentry","category-general","tag-big-trends","tag-bollinger-bands","tag-bollinger-bands-signals","tag-do-you-recognize-the-3-early-warning-signs-of-a-market-reversal","tag-market-reversal","tag-price-headly"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v23.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Do You Recognize the 3 Early Warning Signs of a Market Reversal? - INO.com Trader&#039;s Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/wwwtest.ino.com\/blog\/2011\/02\/do-you-recognize-the-3-early-warning-signs-of-a-market-reversal\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Do You Recognize the 3 Early Warning Signs of a Market Reversal? - INO.com Trader&#039;s Blog\" \/>\n<meta property=\"og:description\" content=\"Today we have a special guest blogger, Price Headley of Big Trends. 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