Thursday, August 19, 2010

Market commentary for Aug. 20th

First, let's take a look at the market action yesterday. Both the Dow & S&P 500 hasn't closed at this low a level since July 21st. The volume on the selloff today was the highest for the week. We closed below the 50 day Moving Average (MA) on both Indexes today and remain below the 200 day MA as well. The Dow closed today at 10,271. The next test will be at 10,100 on the Dow, as there is some support there. For the S&P 500 support is at 1065, which is not far from the 1075 close today. We remain between the bands drawn a few days ago on the Dow and S&P and are still in a tight range. There is no important data to be released Friday. It is August Options Expiration day.

I have included a chart today of the Put to Call ratio for 2010. I have included this chart before and it might be worthwhile to go back and read my comments on July 26th about 2009 and 2010 data by clicking here.
You will notice that the ratio was in a tight range recently after dropping from a wider range before that. In the last 8 days, the Put to Call Ratio has been above 1.00 in 6 out of the past 8 days. It may be shifting again to the previous period when the range went much higher and the lows were mostly higher.

The VIX closed up over its 50 day MA for the first time since the beginning of July. It is too early to make any predictions so more time needs to play out but both of these indicators are worth watching on a daily basis for a while.

Now many think that the stock market has been up except for the past few days and the highs a week ago. I would like to dispel that notion right now. as it is all smoke and mirrors. If you look at the Dow chart above, it looks like only a few days have we been dropping. But then look at the Dow Gold ratio chart for exactly the same period and you will have a different perspective. In real terms the stock market has been losing real value for a while now.

I want to send a thanks out to Vic for his kind words and comment yesterday. Thanks Vic.

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