Sunday, June 14, 2009

ROBO Ratio, Fibonacci Arcs, and S&P Time Analysis.......A Storm is Brewing

Today's video discusses a bit about how to use Fibonacci arcs, and what they may be telling us right now. Also takes a look at the time relationships of recent legs up and down in the S&P 500 since the Oct 10 2008 crash low.

Click on Chart to Enlarge

The chart above is the "Retail Only Buy Only" put/call volume ratio chart from For the first time since the bull market highs in 2007, both the call volume and the ROBO ratio itself has risen above its standard deviation bands. The indicates that small individual traders are buying calls to an extreme degree. Unfortunately as a group, they/we get most bullish at the worst possible the tops of major rallies when all coasts look clear.

Bullish extremes like this are less frequent than bearish extremes, and prior moves of the ROBO ratio above its bollinger band has typically occurred only in the very late (often almost the absolute peak) stages of rallies if at all.

At a time such as this, it is interesting to wonder what will be the next potential "driver" of a decline in stocks. While I can't tell you for sure, an interesting news item broke late last week that makes you go hmmmmm. I'll let you read for yourself and do the follow up, but if this proves to be legit, then it will raise many serious question about our own government's past conduct in the sale of bonds, and also obviously makes you wonder if someone else (foreign govt.?) knows something we don't and is trying to get $135 billion in cold, hard cash for their US bonds before we all find out.

Regardless, it pays to train yourself to think opposite the crowd. Things look so rosy now to the hopeful eye, but all the data I have presented in recent weeks should be as good as a CNBC news banner to tell a bull that he is in danger of being slaughtered. Time will tell, but if I was long the stock market, I would cash in rather than wait and find out.

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