Saturday, December 3, 2011

Indicator Update

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The VIX has touched the lower bollinger band 3 days in a row. The last time this happened was right before the market plunged in the summer. However, with the bollinger bands relatively narrow, this set-up looks most similar to the Sept 2010 where the VIX began a new downtrend as stocks rose steadily. The VIX didn't CLOSE outside the lower band though, which is a better contrarian signal.

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This is a chart of daily TICK values. It is neutral after an extremely low reading at the end of last week. I really just use the moving average of the TICK values to gauge extremes then look for divergences at/after extremes. I take this as neutral currently.

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This is the advancing-declining issues chart with a 10 day average. Again look for it to reach extremes and diverge. Use the average crossing the "0" line as a confirmation of new intermediate term trend after a divergence. The average has not crossed the 0 line yet, but is close. I take this as neutral, but with upward momentum.

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Since May the equity put/call ratio has traded mostly between 0.55 and 0.85 with moves outside that range creating inflection points. The current reading is neutral. It may take a reading closer to 0.50 before any significant pullback.

At this point nothing looks to be stopping the index from moving to new rally highs off the Oct 4th low. It seems most likely that the market rises for the next 2-3 weeks before topping. Stock has tended to rise into options expiration week for the last few years. So that is still a positive as is seasonality into the new year. If the market makes it till Christmas without a major break, then I expect a top to form around that time.

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