8) Volatility Studies on the TLT/SPX Ratio confirm danger is near
Bollinger Bands:
Definition: I have added a 52-week bollinger bands, which is a measure of market volatility, the band widen when the underlying instrument is volatile, while it narrows or squeeze when the underlying instrument gets in-volatile. Traders use bollinger bands in different way, one of them is to monitor when the bands squeeze which hints a breakout is imminent, as such periods of in-volatility usually followed by strong moves.
BB on TLT/SPX: The band has been narrowing for a while following the 2008-2009 crash, to a very narrow range within the past year or so, indicating the ratio is at a very in-volatile stance.
Average True Range(ATR):
The ATR is another indicator of volatility, without going into too much details about the construction of this indicator, in short it's constructed through a formula that compare the range of each period.
ATR on TLT/SPX: Its visually very clear on the chart, the indicator moves higher when major moves in the ratio occur, starting from the left, the ATR line was high but moving lower following the 2000 market crash, where it dropped below the pivotal zone(colored in YELLOW) to the GREEN zone. The green zone clearly indicates a low volatility environment. A break out from this green zone to the RED zone, signaled a pick up in volatility, and either a market crash or a hefty correction. as shown on chart. The ATR has almost broke into the red area.
Putting Both together:
Looking solely on volatility studies, what we got now is a bollinger band squeeze, and ATR breaking into the red zone in late January, since then, stocks has been making no noticeable progress moving in sideways consolidation manner. The ATR is currently attempting for another break into the red zone which is an alarming signal, hinting we are ready and possibly closer to a move to the downside..
Thank you for reading, i hope that you enjoyed this small series of posts. If you did, i would appreciate your positive feed back through the agree button and comments.
My best regards,
Technician
Subscribe to my trading portal thefxchannel.com
Bollinger Bands:
Definition: I have added a 52-week bollinger bands, which is a measure of market volatility, the band widen when the underlying instrument is volatile, while it narrows or squeeze when the underlying instrument gets in-volatile. Traders use bollinger bands in different way, one of them is to monitor when the bands squeeze which hints a breakout is imminent, as such periods of in-volatility usually followed by strong moves.
BB on TLT/SPX: The band has been narrowing for a while following the 2008-2009 crash, to a very narrow range within the past year or so, indicating the ratio is at a very in-volatile stance.
Average True Range(ATR):
The ATR is another indicator of volatility, without going into too much details about the construction of this indicator, in short it's constructed through a formula that compare the range of each period.
ATR on TLT/SPX: Its visually very clear on the chart, the indicator moves higher when major moves in the ratio occur, starting from the left, the ATR line was high but moving lower following the 2000 market crash, where it dropped below the pivotal zone(colored in YELLOW) to the GREEN zone. The green zone clearly indicates a low volatility environment. A break out from this green zone to the RED zone, signaled a pick up in volatility, and either a market crash or a hefty correction. as shown on chart. The ATR has almost broke into the red area.
Putting Both together:
Looking solely on volatility studies, what we got now is a bollinger band squeeze, and ATR breaking into the red zone in late January, since then, stocks has been making no noticeable progress moving in sideways consolidation manner. The ATR is currently attempting for another break into the red zone which is an alarming signal, hinting we are ready and possibly closer to a move to the downside..
Thank you for reading, i hope that you enjoyed this small series of posts. If you did, i would appreciate your positive feed back through the agree button and comments.
My best regards,
Technician
Subscribe to my trading portal thefxchannel.com
