Want to determine if the market is overheated? Besides tracking divergence signals and the fear index, Bollinger Bands are actually an underrated tool. They visually display the tug-of-war between price relative to the moving average and volatility—historical data shows that the low zone is a golden buying point, while the upper blue area suggests taking profits or partial exits.

Here's a common pitfall: the index can stay in the blue area for quite a long time; reaching it doesn't mean an immediate top. Relying solely on Bollinger Band signals can be misleading; they should be used in conjunction with RSI and VIX. The real trading opportunities occur when three conditions are met simultaneously—price touches the lower Bollinger Band, RSI enters the oversold zone, and VIX shows a significant spike.

Looking back at the April rally, it was very typical: at that time, positions were built at the Bollinger Band low, VIX was at extreme historical levels, and weekly RSI indicated many assets and indices were oversold. This is when the risk-reward ratio truly justified involvement. From a medium- to long-term holding perspective, the current position's risk-reward isn't ideal, and it's better to wait for a more favorable opportunity window. If next year the price falls back to the indicator lows, accompanied by RSI resetting and VIX soaring, that would be a signal to turn bullish again.