Combo VIX and DXY

2021년 2월 2일

Hello traders

It's been a while :)

I wanted to share a cool script that you can use for any asset class.
The script isn't really special - though what it displays is super helpful

Volatility Index VIX

(Source: Wikipedia)
VIX is the ticker symbol and the popular name for the Chicago Board Options Exchange's CBOE Volatility Index, a popular measure of the stock market's expectation of volatility based on S&P 500 index options.
It is calculated and disseminated on a real-time basis by the CBOE, and is often referred to as the fear index or fear gauge.

I consider that a VIX above 30% is a very bearish signal.

Above 30% translating investors selling in masse their assets. #blood #on #the #street

Dollar Index DXY

(Source: Wikipedia)
The U.S. Dollar Index (USDX, DXY, DX, or, informally, the "Dixie") is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners' currencies.
The Index goes up when the U.S. dollar gains "strength" (value) when compared to other currencies.

The index is designed, maintained, and published by ICE (Intercontinental Exchange, Inc.), with the name "U.S. Dollar Index" a registered trademark.

It is a weighted geometric mean of the dollar's value relative to following select currencies:

• Euro (EUR), 57.6% weight
  
• Japanese yen (JPY) 13.6% weight
  
• Pound sterling (GBP), 11.9% weight
  
• Canadian dollar (CAD), 9.1% weight
  
• Swedish krona (SEK), 4.2% weight
  
• Swiss franc (CHF) 3.6% weight
  

In "bear markets", the DXY usually goes up.
People are selling their hard assets to get some USD in return - pumping the DXY higher

Corollary

I'm not sure which one happens first between a bearish DXY or bearish DXY... though both are usually correlated

If:

- VIX goes above 30%, usually DXY increases and assets versus the good old' USD drop
- VIX goes below 30%, usually DXY decreases and assets versus the good old' USD increases

This is a nice lever effect between both the VIX, DXY and the assets versus the USD

That's being said, I don't only use those 2 information to enter in a trade.
It gives me though a strong confirmation whenever I'm long or short

Imagine I get a LONG signal but the combo VIX + DXY is bearish... this tells me to be cautious and to:

- enter at a pullback
- protect my position quickly at breakeven
- take my profit quick

For a mega bull market (some called it hyperinflation), you want your fiat to drop in value for the counter-asset to increase in value.
And before you ask.... yes I look at what DXY is doing before taking a trade on BTCUSD :)
In other words, DXY going down is quite bullish for Bitcoin.

Settings and Alerts

The settings by default are the ones I use for my trading.

The background colors will be colored whenever the COMBO is bullish (green) or bearish (red)

Alerts are enabled using the brand new alert function published last week by TradingView

That's it for today, I hope you'll like it :)

PS: In this chart above, I'm using the Supertrend indicator from KivancOzbilgic

Dave