Monday, June 1, 2015


Twenty years ago I got my CMT designation (Chartered Market Technician) from the Market Technician's Ass'n, comparable to a Master's - three levels over three years, including a thesis which was on Sentiment, or Contrary Opinion, sometimes viewed as the fourth leg of the Technical Analysis stool of Price, Volume over Time. Since then I have written a blog on the Indicators I feel are most meaningful as to market direction, short and long term. Important to remember is that change of direction occurs when a majority of Indicators reach EXTREME; the "crowd is usually right during the trend!

For new readers I wanted to explain the matrix below and how to use these.

First, the major Indices - Dow 30, Nasdaq or Over The Counter, and S&P 500 (SPX) levels, week over week.
Nasdaq to NYSE (New York Stock Exchange) Volume indicates the level of speculation- high OTC.
The CBOE (Chicago Board of Options Exchange) put/call ratio measures how afraid traders are of the immediate future - buying put options to hedge or speculate on a downturn - this is one of the better short term signs, as they are usually wrong- i.e., high put/calls are Bullish.

The VIX, or Volatility Index is more intermediate term and coincident, rather than leading - at current low levels (12 or 13) it could foretell an imminent drop in the market - VIX calls can be used as a hedge, as they rise in downturns.

Advance/Declines are Breadth Indicators, showing investors' confidence in stocks - they have been negative most recent weeks.

Two market survey letter - the Intelligent Investor, put out by wire houses on broker advice, and AAII, or Independent Investors polled by postcard weekly, are also contrary Bull/Bear signals. High Bulls on either, especially AAII, are dangerous short term.

COT or Commitment of Traders is a record of trades done on various commodities, with commercials hedging being the "Smart Money". Various records of Insider Trading - CEOs, 10% holders, etc. have been boringly stable recently and of no apparent use. Fund flows are also of interest, but not actionable. Margin Debt is at record levels (with low interest rates) but are coincident.

Here are last weeks numbers:
Date> 5/29/2015 5/22/2015
Indices: DJIA  18010 18232
  NAZ  5070 5089
SPX  2107 2126
WklyVolume (Bshs). naz/ny…. 7.2/3.4 8.3/3.4
Specul.Ratio hi=bullish 2.12 2.44
Sentiment: put/call-CBOE  64 64
VIX>50-alltmlow=8.8 13.8 12.1
Advance/Dec-NYSE.. 965/2259 1496/1731
Weekly Net: -1294 -235
     Cumulative: 166797 168091
Weekly  NYSE hi/low… 148/132 265/110
New Hi's/Low's Nasdaq h/l 190/142 300/152
McClellan  Oscillator -34 -8
McClellanSum .+750/-1000 175 274
Newsletter Inv.Intel -Bull 48.5 50.6
Surveys-Tues Bear:-5yrs 14.9 15.8
Wed. AAII  -Bull  27.0 25.2
Bear  25.1 25.0
COT:SPX w/w large/small (net)k 8k/(16k)
COT:gold  comm.hedg long-short.000 (110k) (133k)
COT:OIL comm.hedg long-short. (345k) (350k)
US$-WSJ 87.3 86.3
CEOinsider selling 27:1 36:1
off.&bd b/s.vs. 10% holder b/s .160/20 .160/50
3-box rev Bullish%-  64 64
US equity -ICI Fund Flows WeekDelay (5.4B)
MMF flows Change in $B 4.6B 20.6B
MargDebt- top (300M) monthly  507B
ETF:mthlyEqty/ Int'l/Bond-$B 1256/519/318
2-yr Tsy Yield: Inflation 0.61% 0.62%
TIP (ETF) Inflation 113.21 112.93

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Zero (IN)Tolerance

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