Saturday, November 20, 2010

Another new low on Put to Call ratio

Yesterday's market close for the week showed another new low for the Put to Call ratio. It closed on Friday at 0.66 and the week before it closed at 0.69. This is yet another sell signal that we are going lower. The question you might be asking yourself is why did the market have a good day on Thursday? Simple answer, 2 factors, both related. The first factor was the GM new IPO offering, which was a good thing if you want the government out of the car business. With the IPO, the government can get the money back they invested to save the auto industry and jobs. THe saving of jobs worked and it looks like GM has a better footing to do both.

Now the second factor, which I said was related was this, the market was manipulated by the Fed to stay up, so the IPO would be seen as successful. The Fed did say it's monetary easing (manipulation of the stock market as just one manifestation of the use of that word) was working this week when Bernanke spoke abroad. With prices propped up, it was a great climate for the IPO that day. But on Friday, the market reached a more bullish extreme as puts had been dumped on Thursday and Friday causing the Put to Call ratio to go even lower than last Friday, Nov. 5th.

We may be setting up a pattern of increasingly lower lows on the Put to Call ratio, which in turn will set up larger sell-offs and possibly this is how we have have the really big one. When that happens we should see this ratio drop as low as 0.5 or lower.

Below is a 1 month chart of the Dow. As I said on Nov. 5th, the Put to Call ratio signaled the reversal in trend. Compare where we are now, with an even lower Put to Call ratio yesterday. We did not go over the 25 day Moving Average line in yellow. So I see another leg down within the next week and a half. I say a week and a half because we have a short week because of Thanksgiving. So it will take the following week for the market to drop below 11,000 on the Dow and stay there. Watch the hype about what a great shopping day the day after Thanksgiving was for Retail Sales. It will be all lies!

There won't be much to post next week and you may be traveling, so let me wish one and all a very Happy Thanksgiving. My wife and I will be local and enjoying a Turkey dinner with my friend and neighbor, his children.

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Anonymous Anonymous said...

thank you for your analysis!

I am patiently waiting for my TZA to pay off.

Happy Thanksgiving!

9:59 AM  
Blogger Minneloushe said...

I am patiently waiting for both TZA and BCON to pay off, and beginning to fear that neither will. The street seems to think Beacon will go bankrupt. It is very depressing to see the stock so low, and it must be demoralizing to the fine employees of the company. I visited there and Gene Hunt showed me around, a while back; I believe in this technology, but wonder if GE or some other giant is just waiting for them to fold totally so they can pick up the pieces for nothing. Very depressing indeed.

8:33 AM  
Blogger Charles Amico said...

I guess that makes two of us, JW. BCON was undercapitalized when they began this adventure and didn't raise enough cash in the first place, so now they beg for loans and grants from the Gov't. to keep them afloat. They do have cash on hand to build out Stephentown, NY.

3:57 PM  
Anonymous Anonymous said...

Mr. Amico,
are you feeling now that your TZA purchase will not be paying off? what is your reason for feeling this way now? technical wise, do you feel that we will be in the situation to be testing the lows?
thank you

1:56 PM  

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