Major Sell Signal from the VIX, but Short-term Oversold

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First off, I have been waiting to recommend an intermediate term bearish trade until the VIX was showing a sell signal from all the ways I look at basically. The blue line on the chart above is a 63 day Time Series Forecast study which has been a very good guide for timing the market via the VIX in this bear market. Intermediate time frame traders (several weeks to a few months) should definitely take a bearish bias from this point in my opinion. Long term investors should initiate appropriate hedges for their portfolio. In my opinion, put options with either March or June expiration should give a good time frame for downside protection.

Click on Chart to Enlarge

Unfortunately the market appears to be overly stretched to the downside to initiate any short-term bearish trades now. The chart above is the 3/5 day equity put/call ratio showing that as of yesterday, the 3 day average was 110% of the 5 day average which has conincided with short-tem bottoms in this bear market. Also, the short-term model I use to post trades for this blog is as about as oversold as I have seen it. So, I would anticipate at least some market advancein the coming days. I will likely let things play out a couple days, and then suggest a new intermediate term trade to enter with a limit order.

Pete