BEAR WITNESS: MONDAY EDITION
Something new I'm trying out here. I do a lot of stuff I don't tell you guys about. I want to change that. Ideally, I want what my eyes see in the markets to be transferred into your field of vision on a nightly basis. I'll put quick notes on there that reflect what I'm thinking as I look at the information. Charts are the easiest way to digest the information quickly, which is why I use them. No stochastics, MACD or anything like that to speak of...not necessary ever really. No economic statistics or headlines...that's just noise. Raw price information and what can be immediately derived from that information is all that is needed. Hope it helps you over the long run. Here's what got my attention tonight: DOLLAR...
9 CHARTS THAT WILL HAVE YOU DANCING BETTER AND SMELLING GOOD DURING THE WEEK AHEAD
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6 CHARTS THAT PAINT A CRYSTAL CLEAR PICTURE FOR THE MARKETS DURING THE WEEKS AHEAD
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SURPRISE: CALL BUYERS RETURNING TO THE MARKET MAY NOT BE AS BEARISH AS ADVERTISED
The following is the aftermath of the last three incidences of the 20 day moving average of the put/call ratio pulling back 25% from its highs after an abnormally long period of time. In my research, it typically takes 2-3 months for market participants to go from fear driven, excessive put buying to warm and fuzzy call buying. There are rare instances when it takes longer than 3 months. This typically signifies that there is an excess amount of skepticism in the marketplace, as call buyers are reluctant to return to the marketplace. I outlined this study in detail this past week. There have been three instances of a prolonged reversion (longer than 3 months) of the 20 day moving average taking place over the past decade: 2004, 2006 and 2010. I bring this up because we are on the verge of meeting the 25% threshold currently over a prolonged period (longer than 3 months) of time. What can we expect out of the current market now that call buyers have returned? Here are the charts from each of the three incidences over the past decade: click chart to enlarge If this study holds correct, then we can expect a top to approach around the April-May time frame, with the Dow seeing 13,000 and the S&P 1350 before all is said and...
THIS STUDY MAY PROVIDE THE FINAL WORD ON THE PATH OF THE MARKETS FOR 2012
All pertinent notes are in the chart. Examine diligently. click chart to enlarge
3 ECONOMICALLY SENSITIVE AREAS THAT CONTINUE TO TELL US THAT EVERYTHING IS NOT ALRIGHT
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5 CHARTS THAT DEMONSTRATE THE INCREASINGLY BULLISH SENTIMENT IN THE FACE OF PRICE EROSION
The first chart is the combined put/call ratio. It is the foundation for a majority of my sentiment analysis. I use different timeframes, along with numerous indicators in an attempt to gauge if the money is flowing to the bull or bear side. Generally, it is important to see an uptrending market paired with a downtrending put/call ratio as we have in the chart below. You DO NOT want to see price erosion taking place in important, leading averages while bullish sentiment is bouncing off the walls. Why? If the market should negate the bearish patterns in the popular market averages, then the firepower simply won't be there for a sustained move higher. Instead, it will be a failed move that serves to reinforce the negative price patterns. Odds are strongly weighted towards any move up in the first couple days or weeks of January being an excellent selling opportunity if that is what the market has in mind. click chart to...
SURPRISE: THE MAX CONFUSION SCENARIOS GOING FORWARD
I wanted to update the study I posted to the website on December 22nd. The correlation between July/August time period and the current market continues to be extremely relevant, deserving close observation. The scenario the study points to fits in well with the maximum confusion scenario that I see for the markets. A continued sell-off into the end of the year will fall under the highly unusual and anomalous frame for the markets. This will lead to a general consensus that since we are about to embark on the first week of 2012 and tax loss selling has subsided, it is now safe to begin nibbling come early next week. The market will continue falling through next week , possibly carving out a low during the second week of January, after most of the bulls have come to realize that the seasonal studies they rely on aren't of any use in these conditions. I think that a weak rally through earnings is a possibility. I also have on the table a possibility of a continued plunge right into the mid to late January, with a low coming around the 24th-25th. This alternative is obviously the most bearish of scenarios. Both of these scenarios have us moving below 1200 at a minimum, with an outside possibility of a move all the way to the October lows in January. These are the max confusion scenarios as I see them currently. I'll make adjustments as needed along the way. Here is an updated chart of the study posted originally on December 22nd, with updated notes: click chart to...