Market comments for Oct. 25th

Are we all excited today to see that the G-20 ended their Finance Ministers session agreeing to "try" no to do harm to each other? Traders seems thrilled today as the Dow is up about 65 points at this hour and going above the 11.200 level I said we would get to back in mid September and it may even go to the 52 week high of 11,258 before the elections.

However, I caution all you believers that this is a real Bull market Rally that Friday was the lowest Volume day since last December. When can you remember an October where Volume was so low? I can't! The Volume has disappeared this month and the Volatility Index is hitting lower lows each day, it seems, although today it is up a bit. About 10 days ago it was as low as 18. From a historic perspective, it has been much lower over the past 10 years. It was as low as 10 from about 2005-2007 and signaled the quiet before the storm which followed. In 2008 it soared to 90. So we are by no means at the lows on the VIX. But there seems to be a quiet before this election and many analysts believe that the election is already baked into the market and most likely it will selloff just when the news is in on the results. You know, it's that old "buy on the rumor and sell on the news, game.

Market comments for Sept. 7th

It's a quiet day today, with low volume, but the VIX is up almost 10% in early trading. No news on economic data is to be released today but the main 2 pieces of data to pay attention to this week is the Initial Jobless Claims on Thursday as well as the Trade Balance and on Friday the release of Wholesale Inventories for July. The Trade Balance and Wholesale Inventories data are both backward looking data and therefore not as relevant in our concerns. But the Initial Jobless Claims is relevant as it is current data.

There are only 11 days remaining before Options Expiration for Sept. on Sept. 17th.

Market comments for Aug. 27th (UPDATE)

While I was waiting for the GDP numbers to be released this morning and knowing September was just around the corner, I was wondering how this Sept. markets were going to be compared to other years. Then I got the Chart of the Day from chartoftheday.com and see they have answered my question with today's chart. It isn't looking pretty is it.

The GDP number came in at +1.6% Revised from 2.4% previous estimates and they had expected the number to come in at +1.3%. Before the release of the number the Dow Futures were up +27 and after the release of the data it is at +68. There is a definite upward bias going into the open this morning. European markets are mixed with not much movement up or down at this point. Think about this for a moment. When is a 1.6% revised GDP worth it for the markets to go up? Answer: When they thought it would be much worse! That's where we really are in this economy!

Only 3 trading days left in August. As you can see from the chart above that August usually is barely over +0.2% gains for the month. The Dow closed July at 10,466, so we are significantly down form that going into today's trading. We started off the year at a Dow of 10,428, so we are definitely down for the entire year so far and I don't see any recovery in the market before the end of the year and as I have stated many times I see us going a lot lower into the next year. So hang on to your hats today as it is difficult to guess whether the market will be pumped up or trashed. VIX should be something to watch today. Yesterday it closed at 27.37 and for the past it has stayed above its 50 day Moving Average for the first time in about a month and a half.

Fed Chairman, Bernanke, will be speaking today in the Jackson Hole, WY gathering of business leaders and is expected to take questions from them. His comments will move the markets.

With the Dow set to move back up today, expect Gold to also go up so that the net Dow to Gold ratio stays low. It has been recently in an 8.1 to 8.3 range and I don't see this ratio going higher any time soon. In fact I see it going lower. The net is that when the Dow does rise, its real value as measured by Gold is less.

UPDATE: 7:00am PST
While the Fed Chairman was releasing his speech to the press, the Univ. of Michigan Consumer Sentiment number was released and it came in lower than expected at 68.9 vs an expectation of 69.6 for August. Last month the data came in at 69.6, so this is even lower and marks a number of months it has slipped.

Stock market outlook: Volatility will abate somewhat this week.

I wanted to summarize the data for Friday and where we were last in preparation for tomorrow. I checked on Friday's Put to Call ratio at the open on Friday and it was at an amazing 2.10 within a half hour of the open. It closed on Friday at 1.21 and while that is much better the day sets up a rally for Tuesday or Wednesday. Those are extraordinary levels and the 2.10 extreme and a buying signal.

The VIX closed at 32.07, up 2.39 or 7.5% with the high on Friday at 33.30. I am waiting for a rally on all Indexes with the Dow going to 10,500 to 10,600, before it reverses and the market goes down again significantly. I expect volume to drop somewhat as the market rises and then to pick up on selloffs.

I still like TZA Options to trade and plan to over the coming days and weeks.

Market outlook: Higher volatility days ahead.

Scary day today for the markets. If you pay attention today, your blood pressure will surly rise as will the VIX. The Nikkei dropped almost 300 points in overnight trading for a 3% loss as did the Topix and currently European markets are also down anywhere between 2% to almost 3%. World jitters are said to blame and certainly we have enough of them. For example, concerns over the North Koreans starting up the war again with the South Koreans and drawing in China and the US. Then there's the catastrophic Oil spill in the Gulf which has been going on for a month and most likely will continue for another 2-3 months before the well is sealed. Then add to the mix the concerns in the Euro zone about the recent debt problems of Greece and now of Spain, not to mention our own debt problems, and you have a vessel holding a lot of world issues in it.

However, everyone seems to discount the fact that the charts of the markets, which are produced by trades of our collective human minds and the software, which has been used to create formulas which can execute those trades in micro seconds, have been telling us this market drop was coming over a year ago. But we wanted to believe that we were missing out on the rally if we weren't in this rising market. Well watch how you react when the market now reverses. It's the old greed and fear paradigm at play. This creates volatility in markets. So watch the VIX index rise today.

Dow Futures point today for the Dow to drop as low as the 9700-9800 range and the other Indexes point to a similar move. If you are new to this Blog, you might want to read back issues of this Blog ofr the past 6 months or so, sampling the various warnings I had posted. I will summarize the message here as follows: We are headed eventually here to testing the previous market low of 6,440 and it will not hold ultimately. Prepare your portfolio for this and your psyche. It will not happen all at once but rather will play out over the next year or so. But it will play out!

If you haven't noticed lately, 3 Month Libor rates have doubled over the past few months. The rates, which are what banks charge each other for lending to each other, has gone from a low of 0.21% to now 0.54%. All in preparation of a tightening of lending even more than previously. Hmmm, you think they knew tis trouble was coming? Hmmm, Oil has gone down significantly as well. Today it is down over $2.29/barrel to $67.84. One would have thought with as large an Oil spill that the prices would have gone up. This is deflationary.

I thought we might get a relief rally back to 10,500 to 10,600 but we may not as well. I might be forced to part with the TZA OPtions I bought yesterday but it was not a large bet, so that's OK too. I still have 1/2 of my October Call Options as well as owning many TZA shares outright as well as FAZ, both of which are ETF Ultra Shorts. TZA is up to $8.20 in pre-market for a move of 7.5% after hitting a high of $8.38/share earlier.

Watch 1044 on the S&P 500 as that is where support is. If we can hold that, we can then get a rally in the next few days. If we can't we are heading lower and breaking that support level. And it's a long way down from there before another support level will stop the drop. On the Dow, that level is at 9850 and on the Russell 2000, that level is at 580.

May 19, 2010 Dow Chart pattern: Continuing Head and Shoulder pattern

I thought I would put up the latest chart of the Dow with my lines drawn to show the Head and Shoulder or "W" pattern formation so you know how far we are in completing the pattern and what is to be expected in the days ahead. The Blue lines on the chart are what has transpired up to today except that to the right of yesterday's data is how the "W" pattern could be completed. Understand the shape and timing of the rest of the pattern is unknown, but the shape of a "W" is clearly visible.

Today is starting out as a down day, as Futures point to a lower open but also, European country markets are all down at this time by more than 2.0%. Asian markets were down as well by 0.5% by the Nikkei to as much as 2.5% in Singapore Straits Times. For a clearer picture of market direction the next few days, watch the volume today to see if it is equal or greater than yesterday's Volume and how the price action goes, up or down. My bet is market will continue to go down this week and then rally up the beginning of next week before a bigger selloff in early June.

The VIX closed at 33 yesterday but I expect a spike between today and Friday of up to 40 again. The Put to Call ratio during the day yesterday stayed between the range of 0.87 and 1.02, which is not at the extremes of recent daily movement. I would expect this ratio to spike at the time of the reversal of the current drop. Without this spike, I wouldn't believe the move up in the market as the Bulls are wishing for, would be real. It would be more likely a pause in the down trend and not a return to the Bull rally of the past year.

New data out this morning for CPI was not good for Gold investors as the Core CPI for April was -0.1%, making this the 4th consecutive month of either zero or a negative number. This indicator clearly shows we are in a deflationary period. There is no real inflation and in my view this means no real recovery. Inflation will come in due time, but until the economy truly recovers, don't look for inflation. This makes the Gold trade look stupid right now as it is very speculative that inflation is about to rear its ugly head. I don't know how long the current Gold hype will continue but as soon as many recognize we are in a deflationary period, we will have a major selloff in Gold.

Stock market outlook: Thunderstorms with Tornado winds

I feel like I have been crying in the wilderness saying this correction is coming for quite a while. And most recently I have been saying so in a feverish pitch if you go back to my March 23rd posting. But it is now here and it will unfold slowly but consistently. The 3 charts today show that we have broken below support of the Dow. Oh, and all the Indexes are similar so it's not necessary to post all of them here.


We will be breaking below the 200 day Moving average shortly for most of the Indexes as we are closer as of Friday's close. The chart above, on the VIX (Volatility Index), shows that we hit a low and a high all within weeks. When we hit the multi year low I wrote here that it was a signal that the long awaited drop was near. Well it only took 2 weeks or so and here it is.


Also note the Put to Call ratio chart above, which shows we had hit the multi year low of 15.23 only weeks before this major rise up. It was a signal that there was too much optimism in the markets and it helped fuel the drop. All 3 charts are of a 1 year timeframe so you can se various moves and look at what happened in the Dow.

Now I know many of you think the worst is over from yesterday's market action. Heck, I heard on CNBC that the markets had "recovered" from the previous day's major selloff, which they still say they don't know what happened and it must have been a system glitch. In my view they will find no system glitch. This was a panic selling moment. More will come. Everyone knows the meteoric rise of the Dow since the lows had to come to an end. Those folks feel a 10% correction was inevitable. And so we have had almost a 1000 point correction from 11,400 on the Dow to 10,400, but, unfortunately, this is just the beginning of the big step down in all major markets. Elliott wave Theorists have been saying it is coming for a while as well. I posted a 30 year chart yesterday. I suggest you look at it and ask yourself this question. What do I do if this really does happen? Am I positioned to weather this kind of a drop? And lastly, Uf not, what can I do in the coming days and weeks to get more secure and less vulnerable to a major historic Bear market collapse like happened in the Great Depression.

I have many Short positions and Options currently, so that is my bias. I listen to myself and ask myself the same questions. I still see much upside movement in them. Here are two recent purchases and their status. On Monday I mentioned I had purchased a Call Option on the Ultra Short ETF, TZA, for $0.58/share with a Strike price of $9.00/share and an Expiration of October 16th. It closed yesterday at $1.74, after hitting $2.03 earlier in the day. So that one is up currently 200%. My other one was on MGM. It was a Put Option for a Strike Price of $12.00 for September for $1.15/share. It closed yesterday at $2.08/share. This one is up currently 81%. The underlying stock has closed at $13.12 and for a brief moment this week actually went to $12.52, well within the reach of a $12.00 Strike Price. And much can happen between now and September on this one as well as the TZA Call Option. I also have shares of TZA which I have held on to. I also own some FAZ, which is an Ultra Short ETF of the Financial sector. It has moved this week from about $11.50 to $15.00 for a move of 30%.

So there are other vehicles available to you if you need protection. Talk to your financial advisor. Don't put all your eggs in one basket. Consider cash a part of every portfolio. But don't do like many folks out there do. Don't look at your holdings only when a crisis appears. It's too late. You worked hard to make your fortune or are still working. Don't be a slave to events. Take some accountability for your future and manage it, rather than letting external events manage you. Best of luck. We will be visiting this issue as the days and weeks unfold the market direction more clearly to you. I have my crystal ball. I hope you do too and that you're not looking at yours through rose colored glasses.

Market outlook: More of the same for the foreseeable future.

More of the same for the foreseeable future. That isn't too encouraging for those long the market but with ADP's jobs numbers coming in at a loss of 298,000 jobs, things aren't going to get much better. They had expected a job loss of only 213,000 jobs.

Yesterday, the Dow had dropped 185 for the day and at one time it was down 199 points. The put to call ratio is now at 0.93 and the VIX (Volatility Index) closed at 29.15, up 3.14 points. This is the highest it has been since the beginning of July.

I am still holding the ETF Triple Short Bear Funds, TZA and FAZ. Yesterday TZA closed at 15.76, up almost 7 % for the day and this with the highest volume it has had in 6 months. FAZ closed at 26.39, up almost 14% for the day, with its highest volume also in more than 6 months.

As I have said many times, I expect the market to be in a correction mode till October Options Expiration. We are headed lower most likely back to 7,800-8,000 or so and depending on the economic indicators projected for the 4th quarter this year, we could test 6,400 sometime in the first quarter, possibly as early as January when Christmas Retail Sales numbers will become evident.

Market review

So Continuing Claims are down a bit today and the Weekly Job Claims are down a little over 8,000 but you would think by the commentary on CNBC this morning that everything was turning for the better and we are almost at a point where we are coming out of the recession. Bah, humbug! You can't believe that hype really, can you? I surely don't. Look folks, let's face it, many are on vacation and things are slow in business this summer, including layoffs. Restaurants might be surviving based upon summer vacation visitors and many stylists might be getting some business because people wanted their hair done before their vacation. But I tell you things are no better out there and this Fall, which by the way is only 2 months away, is going to bring back more unemployment. Don't be lulled by complacency that things are truly better, by just buying into an overbought market. You will surely be disappointed and lose some capital if you do. Next week they will have the Unemployment report for July and while it currently stands at 9.5% unemployment in June, I expect a creep up for July, maybe to 9.7%.

But remember the Consumer Confidence numbers came out this week and were down from the previous month. June numbers from the Conference Board for Consumer Confidence was 49.3 and in July it was 46.6 and when the economic outlook is good this number is usually over 90 to as high as 120. So most Americans don't see things improving going forward, and are concerned about whether they will have a job or not. Many writers of economic newsletters are wondering about whether there is sufficient capital to truly have a free market right now and they fear it is manipulation that has created this rally. I am concerned about this too. It is in Wall Street's interest and now the Federal Government to have the stock market rise to give us all the confidence that things are getting better and therefore we should trust the stock market with our capital and invest. I would like to share one line of a recent report I have seen and must keep confidential. Here it is: "even if the Chinese lent the U.S. all their $2 trillion, it would only cover this year’s U.S. borrowing. Where is the U.S. going to get next year’s? Because next year, it’s going to need even more. Let me be as clear as possible. There’s no way out of this without major structural changes. It’s not going to be just a disaster. Catastrophe is a better word."

The Put to call ratio is about 0.92 and the VIX closed yesterday at $25.61 and remember what I have said all along: Preserve capital and we will have a major stock market correction sometime before the Options expiration for October. We are still in the range from 7,800 to 9,300 on the Dow and have not gone above that level yet. If you want to try to capitalize on the move up in the market, go for it but have your hand on the trigger to sell. You have to have the time to watch the market to be able to do it though.

Market summary for June 25 and chart

I know many are wondering what is going on in the stock market, as I am reporting bad news but the market is rising. It is confusing indeed. But the way to keep a proper perspective is to have an overall long term view to determine what is really going on. In that vein, I have prepared a 2 year chart of the Dow as you can see below. The most important part to focus on is the fact that even though the Dow had a 173 point rally, the closing price is still below the downtrend line and as long as that continues to be true we are headed lower. And the Dow is still below its 200 day Moving average. So I am not blowing smoke at you. Facts are facts in this world of emotions.



Volume was below Monday and Tuesday's volume today but slightly more than yesterday's volume. The VIX closed down dramatically to 26.36, down almost 10%. The Put to Call ratio closed at 0.89, so there was nothing telling with that data. I have not lost confidence that my prediction of a down market will happen, so there is no change in my views with the market rise today. There would need to be a sustained rally to a higher high on increased volume for me to change my outlook. For now I stand pat.

Market summary for June 17, 2009

The Market closed mixed today and the change was insignificant in all three Indexes. However, the big news to me today was that the Put to Call ratio closed at 1.13 which is the highest it has been in a long time. As a matter of fact, within the first 1/2 hour, the Put to Call ratio hit a high of 1.41. From the chart above you can see where that would have been, if it closed there. But still, 1.13 is getting up there.

I expect this to go higher before the market closes on Friday as Options are expiring each day. Today, VIX, VXN, RVX Options all have expired. Tomorrow morning settled index options cease trading. And on Friday, Expiring equity, P.M. settled index options and treasury/interest rate option classes cease trading. Expiring cash-settled currency options cease trading at 12:00 p.m. EST. The Quarterly Options Expiration doesn't occur until June 30th.

The volume for the Dow today was still significantly lower than the Moving average, but it was equal to yesterday's. The Nasdaq seems to have equal volume to its moving average. The Nasdaq gained 11 points today, the Dow lost 8 points and the S&P500 lost 2 points. The trend is still down for 2 out of 3 Indexes and the Dow has now fallen back below its 200 day Moving average. The S&P 500 is still above its 200 day MA but it is very close to going back below it again. The Nasdaq still has plenty of room above its 200 day MA.

Volatility was somewhat lighter today as the VIX closed at 31.54 today, down slightly from 32.68, which was yesterday's close.

Data announced in pre-market today was the CPI (Cost of Living Index). Many investors have been discussing perceived inflation concerns. But today, the CPI index came in at +0.1%, hardly inflationary. Yet many worry that eventually the heavy spending by the Treasury and the Fed flooding the market by printing as many dollars as the presses can turn out. I am sure eventually we will need to worry about inflation, but every sign I see is that we are still in a deflationary period. Everyone is dropping prices in hopes to gain more volume and sustain profits. But the Consumer is deaf to these announcements and continue to save cash rather than spend. As long as this continues, this economy is not going to recover anytime soon. You may not believe this but the best way of testing this premise is to ask yourself the question, Am I spending as much now as I did a year ago and am I going to be spending more over the next 6 months? Anyone want to respond, click on the word Comments and add your opinion as to how you are answering this question. Please also leave the name of the State you are living in currently.

Also, please don't forget to take the Mini Poll on how long you think the recession will last. Thanks!

Market summary of June 16, 2009

The market closed down today reaffirming the trend reversal signaled last week. The Dow closed down 107 points to 8,505, while the Nasdaq closed down below 1,800 to 1,796. The S&P 500 closed down 12 points to close at 912 for the day. Market volatility, as measured by the VIX Index, closed at 32.68, which is at the highest level since May 26th.

An interesting piece of data today is the Put to Call ratio. It reached a closing high today of 1.01 and this level has not been reached since the lows of the market on March 30th, when the Put to Call ratio reached 1.14 on that close.

We are still only 2 days into Options Expiration week and the volatility will continue to rise, but it is difficult to say whether the market will continue to sell off the rest of the week. We have not yet gained momentum enough to drop more significantly.

The volume traded today was about equal to yesterday, however, it is below the trend line moving average. With light volume this market could keep drifting lower. Shares of TZA closed at $23.80 after reaching a high of 24.01 during the day. The last 2 days of TZA had higher volume than the previous day. What tomorrow brings should be down again, but I am learning to respect the market has a mind and will of its own.

May 30th Stock market report: Week's summary and the week ahead

It was another painful week for Shorts, including yours truly. But we are now back where we were on May 18th when the Dow closed at 8,504 and the S&P 500 closed at 910. Yesterday the Dow closed at 8,500 and the S&P 500 closed at 919. The Nasdaq has done better as it closed on May 18th at 1732 and yesterday closed at 1,774, for a 2.4% gain. My ETF Triple Short play, TZA back on May 18th closed at $26.65 while yesterday it closed at $24.84, or a 6.8% loss, even though it reached a high yesterday of $26.63. A close friend of mine has been going along for this ride and has SDS. His SDS on May 18th closed at $57.76 and yesterday closed at $55.81, about a $2/share drop or 3.5%. Sorry friend! With these ETF's they can explode in a more volatile market, but we have not had the volatility, in either direction, for that explosion.

The VIX Index, which measures Volatility, closed yesterday at 28.92. This is well below the highs of the upper 30's to the 50's this Index showed back in April. The Put to Call ratio closed the week at 0.77 and so that measure also is pretty stable as well.

The only thing worthy of notice was yesterdays last hour of trading. The Dow was at 8,400 an hour before the close but then accelerated to its peak at the close of 8,504. Looking at the charts for companies like IBM, symbol IBM, McDonald's Corp, symbol MCD, Wells Fargo Bank, symbol WFC, Bank of America, symbol BAC, and lastly Ford Motor, symbol F, all had huge purchases in the last 15 minutes before the close. I suggest you look at your stocks on a minute by minute basis for 2 days and look at the spike in the last few minutes. To me this spike looked like a climax, and I use the word here deliberately to signify change in trend. Even the VIX dropped precipitously in the last 30 minutes. Therefore, I believe we are at a key turning point for the market. I have put several of these charts at the beginning of this post so you can see what I am referring to. The charts are 2 days of time and one minute intervals for the selected stocks mentioned above. Notice Volume spikes as well corresponding price spikes in the last few minutes.

If we reached a climax yesterday, then something is going to be different next week. I can not say whether the markets will decisively move down or up at this point, because there are no "tells" out there that I watch giving me the necessary direction but here are some facts. Gold closed yesterday up $19/ounce to $979. (I said watch Gold and said it was going past $955 when it was $869.) Oil has climbed back to $64/barrel. Silver has climbed to $15.75/ounce. Either the economy is getting better or inflation worries are here big time. Silver is up 75% since its low of $9/ounce in November. Gold is up 35% since that same time. If this turns out to be a major Bull rally, I will concede I was wrong to go Short with TZA. However, I could be just as right and the market is set to go down from here. The old adage "Sell in May" became a noted slogan for a reason. That reason may come to fruition.

My major emphasis has been to preserve capital on this site for the past few months. I said the rally was for real back when it turned up and I stated at that time many will not believe it. Well, for the past few weeks it has stalled between the low of 8,200 on the Dow and 8,600. I expect we will have a breakout now from Friday's action in the last 1/2 hour. Remember for every purchase yesterday there was a seller. They got the price they wanted for those sales as the tick went up but the buyers could be on the wrong side of that trade. Besides does anyone really believe that Consumers are going to be spending even if Consumer Confidence rose in May to 68.7 from 65.1 in April? To me the bigger news was that Chicago Purchasing Manages index went down from 40.1 in April to 34.9 in May. Time will tell. Stay tuned.

Tomorrow is the end of the month of May so if you have not yet voted during May in my Mini Poll of how long the recession will last please do. But please no double voting.

Market summary for May 27th

Today started positive in all 3 Indexes, the Dow, the Nasdaq and the S&P 500, but they all ended down today, giving up much of yesterdays gains on about the same, to slightly higher volume. The volume is still low considering the 50 day Moving average Volume. The Nasdaq continues to flirt with trying to staying above the 200 day Moving average, as it has stayed above the 200 Day MA for 4 days in a month. For the past 2 days it has managed to stay above it, which currently crosses the axis at 1,700. Today's close was at 1,748. Tech's have led the Market up for the past 3 months, but seem to have staled out at the 200 day MA the past 2 weeks.

The Dow closed today at 8,300. The 200 day MA crosses the axis now at 8,900. While there still is room for the Dow to climb, it too has stalled the past 12 days in a tight range of between 8,200 and 8,600. The Dow's volume has been below the 50 day MA volume 19 out of the past 23 days. We need to have a breakout either above or below 8,200 and 8,600 to see where the next trend is going to take us. To me this and especially the 200 Day MA line are is going to limit the upside move.

The S&P 500 closed today at 893. The 200 day MA crosses the axis at 930. We reached a climax on this Index on May 8th when the Index closed at 930. Since then we have taken a step down. The range here is from 885 to 913. This 200 day MA is dropping at a rate of about 15 points a week. So if we stay exactly where we are now, the 200 day will be pressing on the Index to go lower in 2 weeks. That should take us past the Unemployment numbers for May as well as the GM bankruptcy to determine the impact on the market.

Treasuries rose sharply today as the curve between 2 year and 10 year was the steepest on record on concern surging sales of U.S. debt will overwhelm the Federal Reserve’s efforts to keep borrowing costs low. Ten-year notes have lost 10.3 percent this year, according to Merrill Lynch & Co. indexes, while 30-year bonds have lost 27.5 percent. The unprecedented government borrowing has created concern about a rise in consumer prices. Policy makers have expanded the Fed’s balance sheet to $2.2 trillion while excess reserves at U.S. banks have increased to $896.3 billion.

The VIX closed up and closed at 32.36, while the Put to Call ratio closed at 0.86, up from yesterday's close of 0.72 for the day.

Market summary for May 26th.

I know, the market went up today. So be patient. In my last post I said it would be like a staircase. We may go as high as 8,900 on the Dow before we drop. Just because we spiked up today on nonsense measurements, i.e. Consumer Confidence, the real estate data was terrible, reenforcing the notion that the decline has not stopped or turned. It was painful to see a big drop in TZA today. What did I do. I bought more shares as low as $25.60/share.

The Put to Call ratio closed at 0.70 while the VIX closed at 30.26. Remember watch the Dow and S&P 500 Indexes 200 day Moving averages, as a guide to where we are headed.

Market outlook for the week of May 18th, 2009

Back on April 10th, I made these comments for my Blog post that day regarding watching the price of Gold:

Gold has finally gone down as the market has gone up. On March 17th I said the following, "If Gold can get back below 900 watch the market move up more strongly. Gold is at 916 in pre-market. The low closing last week was 905. We were as low as 820 in January and I can see Gold pulling back significantly to these levels if news continues good."

As we now know from the 3 month chart above, after that statement on March 17th, Gold shares soared after the treasury decided to buy back Treasury notes, going to $952 before settling in back at the close Friday of 880. That is a significant pullback and shows the rally for the past 30 days is for real. Watch for moves up in Gold to signal a market reversal."

If you want to know where the market is going watch Gold, because as either inflation is going up or if people are more worried/scared, or manufacturing has sharply increased and is using more of the precious metal, Gold rises. Well this week we saw the Core CPI almost at zero so that indicator should not make Gold rise. Neither has manufacturing increased the use of Gold. But Gold did rise this week, closing at $932/ounce. The only reason is that people are more worried about where we are in the recovery of our financial system and the economy. Gold may go over the $952/ounce it had done back earlier.

The Dow closed this week at 8,269. This is down 305 points from the previous week's close of 8,574. The Nasdaq closed this week at 1680 and is down 59 points from the previous week's close of 1739. And the S&P 500 closed this week at 883 and is down 27 points from the previous week's close of 910. These declines although not steep were steady starting on Tuesday and continuing to the close Friday. When the market is in a declining phase low volume can chip away at these indexes for quite a while until the final surge to the lows and then reversal in trend. So as we look ahead, it is difficult to predict when this decline will stop and where it will stop.

The flood of newly issued shares by many of the Banks to raise capital sucked the wind and momentum of the uptrend rally in this market. More new shares should hit the market this week and next so I am pretty confident this downtrend will last for at least several weeks. My guess is that it will be gradual and possible as a zig-zag saw tooth pattern. You know those patterns as they are teasers. One day up a few points and then a day down of larger proportion. If you are wanting the market to go up it can be very frustrating to watch. However, if you have a sizable short position as I do, you can just let it play out and relax until it picks up steam and volume, because eventually one sells their position to take a profit. Timing is difficult during this pattern but if the focus is profit and not greed, it is a much easier trade.

The Put to Call ratio is also slowly rising but only very slowly as it closed yesterday at 0.80 and while it reached as high as 0.93 on Thursday intraday, it had a much lower range yesterday between 0.73 and 0.80. The VIX also remained subdued closing yesterday at 33.12, up 1.75 for the day, but well below the highs we had come to expect in the 40's and 50's when the market dropped back in early March. It still was a healthy 5.6% gain. It may be the more sensitive of the indicators to watch, in the coming weeks.

Look now at the 3 charts above. They are of all 3 Indexes, the Dow, Nasdaq and SP500. The red line is the 200 day Moving Average for each Index. If you look at the slope of that line, it is my belief that will be the rate of decline for the next few weeks. It looks to me almost predictable. So if you take the Dow, I would guess that we will be down testing the 8,000 level in the 2 weeks and on the Nasdaq we should be testing the 1600 level and on the S&P 500 we should be testing the 840 level again. Here, Jim Cramer of CNBC's Mad Money and I part ways, as he sees Tech stocks taking us higher. I see Tech stocks now leading us down as many take their profits from the lows. Besides, it is the closest Index to the 200 day Moving Average and is being pressed to go lower. Let's see if I'm correct. Stay tuned.

So I will continue to hold both TZA and FAZ and enjoy the ride. I think those on the Short side can go away and come back in a week.

Market outlook: Have I changed my mind on market direction?

Yes, the market surprised me again today as it closed up over 8,100 to a close at 8,125. Did this change my view as to market direction next week? Nope! The reason I am not deterred from my view here is that Volume was down again from yesterday and it has been every day since Monday. A good rule of thumb is this, if the price is rising and the volume is dropping watch out, a big drop is close by.

Well tomorrow the Options Expire for April. Let's see how it ends but I have prepared myself for a selloff in the next week. Today I added to my shares of TZA at a price of $33.59, nearly at the low of the day. The Put to Call ratio closed at 0.76 and the VIX Index closed at 35.79. And today Gold dropped a lot to close down $16/ounce to $876. I said to watch Gold and it sure did drop but I see this too will rise next week but time will tell. Everyone has funded their Retirement accounts and I don't think they will commit to buying until the market pulls back substantially.

Market outlook Update: Wednesday, April 15th, taxes are due

I have updated the chart above with an additional Red downtrend line which says to me that we will not go over 9,000 on the Dow, in this latest move up, unless the news is very, very good on the economy. So we will be in a tighter range than we were before and some, including myself, would be wise to consider selling around 8,600 or so and taking profits on ETF's like TNA and SSO and also Apple and Ford stocks as well.

From the chart above you can see we are going to most likely be in this band from 7,800 to less than 9,000 for a while and with each day making the case going forward for selling before we hit the top of this range. By the way, the 200 Day Moving Average hits right now at about 9,200 and will be going lower and lower each day. Again to emphasize, news will be the main market mover in coming days and weeks. One day earnings will be unexpectedly great for a company which will steal the headlines for that day and another grim with worse than expected earnings for others. It will be volatile. Right now the Volatility Index, symbol VIX, is below 40 at 36.50, but expect this to go back sometime soon to 44-50 again.

Money will be put into 401K's, IRA's and other retirement accounts this week as taxes are due April 15th, Wednesday this week. And some may want to put those funds to work right away. So I see this week still being positive and increased volume on the Buy side.

Market outlook: More of the same!

Have you been enjoying the market rise this week. Well get ready for more of the same. I know, you don't really believe it or are just anxious the market will just drop like a rock. That is how the psychology has been affected by continued daily dropping of the Dow and S&P 500. It can make you be afraid fro a very long time. And on any market pullback it can reenforce those fears. That is why many of us are saying we have changed a generation of investors. Some may never venture back into the market again in their lifetime. They have been decimated. They don't have extra cash sitting on the sidelines to put back into the market at this time.

So here wee are with Futures today pointing up. The VIX Index closed at 40.06 yesterday. One surprise was that the Fed has been buying long term Treasury debt and this has created concern about the value of the dollar. Hence Gold is up this morning over $60/ounce to $948, a real surprise move.

Citigroup has really taken off. As I posted I bought more shares at $2.41/share and watched the price sore yesterday hitting a high of $3.30 but closing at $3.08, but in pre-market it has jumped again to a high of $3.65 and currently is at $3.49/share. From my original purchase price of $1.70/share the stock is up over 100% and rising.

Ford is also doing well. It closed yesterday at $2.47 and in pre-market it is currently at $2.74. My purchase price for this stock is $1.90 so this is up now 44%. It will continue to rise to over $3.25 in my opinion.

And lastly both ETF's TNA and SSO have come back strongly and should continue to move up. Don't forget that Options Expiration is tomorrow and anything can happen. Today volatility should increase as possibly shorts start covering ever stronger as we approach 810 on the S&P, which is a major resistance level. Good luck! Oh, and if you haven't voted in my Mini poll, please do as it is on the right menu margin.

Market Outlook for Feb. 26, 2009

The market has been in a very tight range of late. The VIX currently is at 44.67 and has retreated from the over 50 readings of 2 and 3 days ago. Volume the past 3 days has been higher than normal and the Put to Call ratio has abated down to 0.84 from highs in the 1.20 and higher intraday peaks of the past few days. The fact that we are still holding is encouraging. Also Fed Chairman Bernanke has also stated in testimony before Congress that they might reinstitute the Uptick rule for Shorting stocks which previous SEC Chairman had ended the rule taking the wrath of many investors like myself who called for his head.

I continue to believe we are not heading lower in the Dow and S&P 500 Indexes but my belief has been tested as well. I continue to hold TNA and SSO, AAPL, F and other favorites. It was good to see Ford climb back up over $2.00 the past few days. It had been as low as $1.67 the past few days so it is a nice recovery.

If I had available cash to invest I would wait to see if we can hold these levels before committing more cash to stocks. I still am hopeful we will finish the week neutral to positive.