Market Update

I have been suggesting for the last week or so that I thought the market was weakening at that I am thinking we will start to accelerate to the downside. But enough of opinions, what are the facts I look at?

I look at a large number of studies and different sentiment indicators, but a few simple systems seem to work time and again.

1. The VIX has closed above the 21 day moving average and as of today the 5 day moving average is crossing the 21 day. This is a simple signal that works well on the VIX. Also the MACD of the VIX has made a cross signaling the VIX may rise (and markets fall).

2. 5 days of distribution the last few weeks. Heavier volume down days in the market are what Investor's Business Daily uses to track the market trend. Today was 5 distribution days for the NYSE.

3. Put/Call ratios (both equity and total) have recently made relative lows against standard deviation bands of the 10 day average. That indicates complacency and that is not good especially in a downtrending market.

I would again suggest bearish trades on BNI, DD, DIS. I would hold off on AZO until I see a more clear break down. However, most stocks follow the market, and if stocks start to come down hard, I think AZO is likely to as well.

Pete