August 20th, 2011
Just a quick couple of notes since, for whatever reason, I continue to get between 20 and 40 visitors per day to this morgue site.
We have now had 10 instances where the gauges I use to spot climax selling events and bottoms have hit extreme oversold levels, and yet the market has not bottomed. During the 2010 decline there were only 7 such instances where things like $NYUPV went into extreme oversold territory before the market finally bottomed. Obviously comparing this decline to 2010 is wrong. I have been too busy lately to do much back testing but it does appear to me that the decline this current market is modeling is the 2007-2009 decline.
Go over to Charta-A-Pallooza and take a look at the charts in the weekly section and more specifically the charts labeled like this: $SPX II, etc. Look at the Williams% and the 20/20 sto and then take that, using Stock Charts’ drop down menus, and set up any of those charts so that you can look back at 2007-2009. Note how the William’s% and the 20/20 hit extreme oversold levels several time before the market finally bottomed in March of 09′. Also look back at $NYSI and note that during that decline it dropped to -1600. I keep thinking that $NYSI is headed to the -1000 level, but I could be totally wrong.
More than one index and several key sectors are now back to where they were on the 1st of January 2010. Long term investors are once again seeing the mean side of the stock market.
$VIX is looking like it wants to take out this 48 level and if it does then who knows where that sucker is headed.
The smart money $OEX crowd has been betting heavily on the short side. Just my opinion, but when the smart money senses capitulation and their computers tell them that there isn’t much downside left then you would think that they would get out of their puts and start buying calls at bargain basement prices. But this isn’t happening. At least not yet. Robert McCurtain will put up a post sometime over the weekend and it may show that the $OEX crowd went in long on Friday, but as of last Thursday puts were being heavily bought over calls.
(Added on 8/24: This is a link to Schaeffer’s Volume P/C Ratio page. I’m using it to track the P/C Ratio of the OEX, which is not updated until the wee hours or the following day. Type OEX into the symbol box, not $OEX.)
Just about every sector is being abandoned but to me the most important sector is the $TRAN and I will be watching stocks such as FDX, UPS, CSX, JBLU, and the rest for signs of bottoming. The big boys will come back to this sector but not until they think the worst is over. That could be when they believe the double dip recession is going to be avoided or after the double dip recession shows signs of ending. Whichever comes first.
I actually added a few shares of UPRO in both of the accounts I trade and I’m paying dearly for this. However, my system said that a bounce and/or a bottom was, might be, could be at hand and so I went in with a few more shares. I had an order in for some TQQQ on 8/11, the day I added the UPRO, but pulled that, fortunately. 75% of my trading $$$ is in cash and, because I hate the whipsaws on the short side, I’m just going to keep it in cash until the dust settles.
Don’t ever, ever forget that only the paranoid survive.
GL, C.M.
