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.

HUGE VOLUME IN FIRST 5 MINUTES DRIVES DOW LOWER! Update

The Volume of Dow stocks traded equalled 140 Million shares in the first 5 minutes of the market open with the Dow going down 140 points breaking below 10,000 to 9918.

More updates will be added here during the day today as Options expire for May today.

Update 7:00am PST
The Dow has clawed back to positive territory in the last minute or so at 7:00am PST, 10:00am EST. Volume now 177 Million shares traded on the Dow. It is going to be a roller-coaster ride today. The Put to Call ratio is now 1.37, down from 1.53 at the close last night. The VIX hit a high earlier of 47.20 before backing off to 43.70, the low now for the day.

Update 7:20am PST
Volume hits 200 Million shares for the Dow with Dow down only 12 points.

Update: 7:40am PST
The Put to Call ratio has dropped to 1.27 now and looks as though it will continue to decline during the day. The Candlestick pattern for the first hour is a W pattern except this one has the lower right bottom point of the W higher than the left side. This usually indicates that the trend will be up during the day. Volume now is only 215 million shares.

Update: 8:00am PST
Put to Call ratio dropped again to 1.23 now. Also, Volume currently totals 231 Million shares. market is up as prdicted at 7:40am Update 28 points to 10,096.

Update 8:38am PST
As you can see from the chart below of the Intraday of the Dow, a "W" pattern formed in the first hour of trading. Notice the slope of that first W formation was up as the Red line indicates. This meant that the Dow was going to go up, which it did following the completion of the "W". These intraday charts as as important as longer term charts. But the principle is the same and why when I showed the 2 month chart prediction a few days ago I made a W pattern prediction based upon the previous data points. Volume is 252 Million shares. But remember this move up, which took several hours did not equal the Volume of the first 5 minutes of trading.


Update: 10:30am PST
The Volume just hit 300 Million shares traded today. The Put to Call ratio seems steady in the 1.25 area while the VIX has retreated to 40.80 at this time. I would expect that the volume will surge within the last 15 minutes of trading today and today's Volume could reach 500 million shares traded on the Dow.

Update: 10:53am

Below find an updated Intraday chart and notice this time I have drawn a 2nd red line showing we are headed lower according to the W slanted pattern. Watch this unfold over time.


Update: 11:10am
Volume is now at 310 Million shares. The Put to Call ratio is now at 1.28 so creep in this indicator supports the Dow dropping from this level of being up 76 points or 10147. We should be starting to head back down shortly.

Update: 11:45am
Put to Call ratio increasing and now is at 1.32. Volume now 324 Million shares. Dow now at 10098, up 29 points. So it has dropped as projected from the 11:10am Update.

Update: 11:53am PST
I have updated the chart to show the drop which I had projected the Dow going down. It is not that difficult to predict if you have the time and can look at these charts when trading. It adds to your chances of making a good decision and that's what we are all trying to do. The same principles here apply to any longer term charts. The Volume is 330 Million shares traded on the Dow.


Update: 12:20pm PST
I was asked moments ago what if anything I would be buying right now. My answer is nothing. I expect that next week we will start a rally up to about 10,600 before we make another reverse turn. Around those levels I would byt TZA Call Options again for October expiration. I like the $9.00 Strike Price but more popular are $10.00 Strike price if you look at how many positions have been made. If you want to take a risk, you might consider buying TNA Options, TNA is the opposite ETF of TZA. That's for a short move. Why I don't like it is that I believe the longer trend now is down and these are more risky than TZA. If you buy TZA and the market goes up short term you can just buy more in anticipation of the drop coming. Hope this is useful. Volume now 346 Million shares.

Update 4:00pm PST
Sorry I wasn't here for a while but work called me and I just returned. I see the Dow closed up 125 points to 10,193. I have downloaded the Intraday chart of the Dow below and as you can see from the last red line I drew that the market was going to go up approaching the last part of the day. And while the Dow went as low as 10050 near the end of the day, it formed the last W pattern with a slant to the upside, as I have drawn, signaling a reversal upward. The Volume closed at 438 million, close to my prediction of 500 million shares. The Put to Call ratio closed at 1.32 for the day.

Market summary for May 20th, 2010

Well, as shown in the charts above, it was a heck of a volatile day. I had said I thought the VIX Index was going to hit 40 again in my May Blog post. Today we blew past 40 and went as high as 46.37 before closing at 45.79, an increase of 30% from the previous day's close. The Dow closed near the low's of the day closing at 10,068, which is a loss of 376 points. Also, the candlestick pattern had a lower shadow meaning that this is not the low and tomorrow the markets should go at least lower, most likely testing the 10,000 level again.


The Put to Call ratio hit extreme levels intraday today of 1.64 at 10:30am EST and closing at a high of 1.53, which we haven't seen since October 6th, 2008, as shown in the chart above. Also, on April 14th, I posted the Put to Call ratio as being the lowest in years and it could be a sell signal. On April 15th I again stated I believed we were headed now for the long awaited correction and advised that this was the time to hedge. Since this 1.53 level is at such an extreme, we may see a rally tomorrow going into the close and the weekend. Tomorrow is Options Expiration for May but I think most of the volatility has occurred today and tomorrow should be calmer with less volatility. The candlestick pattern of today does not mark a reversal. Watch tomorrow's pattern for that indicator. Looking at the 2 year Dow chart, you can see the extreme reading of 1.51 was the beginning of the drop of the Dow to the very lows. While I see some small rallies within the Dow over a day or two as normal market movement, I do see we are now headed to retest the lows of the Dow of 6,440 and I believe we will fail to hold there. Strategies of buying Put Options, or ETF's that are Ultra Shorts, can help make you some money. But you just can't beat having a large cash position, sitting this drop out and then buying when the market reverses. If you are not skilled in these tools, you might just better be in cash and wait it out. Talk to your Financial advisor.

Note: If you can't read the charts, trying enlarging them. Also try clicking on any one to enlarge.

Market update: April gains almost wiped out!

I have included 3 charts today, one of a 3 year of the Dow and the other a 3 year of the S&P 500. Both charts are identical. If you look at 1 month charts of each you will notice that we have basically wiped out all of the gains for the month and in my view are ready to begin the long awaited correction. The third chart is of the VIX (Volatility) Index. It rose 20 % yesterday and has been erratic the whole week, signaling major change is about to begin. It recently hit a multi year low of 15.23 and since then has dramatically risen. In my view this is setting up the beginning of the long awaited major correction, where the Dow will eventually go to the low last year of 6,400 and it will break below it causing fear and panic unprecedented in our time. How's that for a positive note to start the weekend. But what do I know, I am only guessing. :)

I have my shorts as hedges to this expected drop, as it will play out through Options expiration in October and cause a very somber mood for the Christmas holiday period and beyond. Bah, humbug!

VIX Index also points to a correction

Another piece of data from yesterday's close points to a 3 year new low. It is the VIX Index which measures volatility in the market. The last time the VIX was this low was in May 2008. That was the beginning of the big drop in the Dow as well as other indexes as shown on the Dow chart with the Blue line. When you take this piece of data along with the Put to Call ratio data from the previous post, it is clear to me we are approaching a MAJOR correction period. I can't predict the exact timing but this could start the decline culminating in the Sept./Oct. period. This is about how long it took to play out last time if you look at the Dow chart. Time will tell.

Pre market outlook for May 20, 2009: More of the same ambivalence!.UPDATE

The market continues to struggle between the Bulls and the Bears. So far it is a tie. Pre Market Futures indicators show again an upward bias, although trading currently in Europe is mixed. Gold holds at $927/ounce in European trading. The Put to Call ratio was basically unchanged yesterday from Monday closing at 0.82, up from 0.78 on Monday's close. However the VIX Index closed below 30 for the first time since September at 28.80, which is not good for those wishing for volatility and wider spreads in prices during the trading day. Just ahead of summer vacations this is the kind of market that can cause markets to drift lower for the longs ahead of the Fall turbulence we have become accustomed.

There were only a few pieces of news worth commenting on this morning. First was what is going on in Japan. Here are a few news excerpts I found noteworthy.

Japan Economy Shrinks Record 15.2% as Exports, Spending Plunge. Gross domestic product fell an annualized 15.2 percent in the three months ended March 31, following a revised fourth- quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. The economy contracted 3.5 percent in the year ended March 31, the most since records began in 1955. “There is a huge problem of over-capacity,” said Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo. “That means capital spending is not likely to pick up.” The failure of export demand to do better than simply stabilize will probably limit the scope of Japan’s recovery.

To read more on this news item above click here.

Another news item was about HPQ ( Hewlett-Packard) and their earnings after the bell yesterday. Here are various excerpts from that story:

Hewlett-Packard Co. said Tuesday that earnings fell 17% in the second fiscal quarter as sales fell across nearly all the company's business lines, most particularly among PCs, servers and printers... -They also disclosed plans to lay off another 6,000 workers -- on top of previously announced job cuts -- as it continues to shed costs... Revenue fell across nearly all of the company's business lines during the quarter. In the earnings call, Hurd said the company is ahead of schedule integrating the EDS acquisition. The company is more than halfway through the planned workforce reduction of 25,000 employees that it outlined last year.

Hurd also said the company has found an additional $500 million in cost savings -- mostly through facilities and other real estate commitments that will be eliminated. H-P also said it will lay off an additional 2% of its workforce -- beyond the number it spelled out last year -- over the next 12 months. That equates to about 6,000 more job cuts at the company.

Many market traders said they see this as positive. I don't know why to be honest. Companies laying off more workers and cutting out costs through restructuring may all sound great but it adds to the overall unemployment rate for the country and those jobs will never be coming back. In my view the real story going on is that Corporate America may survive by cutting workers everywhere but the overall affect on the economy is going to continue to be crippling for a very long time to come. This means more foreclosures down the line, more government help and a lengthening of the time when this thing finally turns around. Markets may move up on selective companies taking dramatic actions to survive, but this is setting up a real plunge in the markets eventually in the Fall unless things change where more jobs are created. With al the talk of stimulus, I don't see it showing up on the jobs front.

Somebody please paint me a rosier picture! You Comment below and I will put it up here for all to see. I continue to hold TZA and FAZ shares.

UPDATE: 4:00PM PST

Markets closed down today. Gold closed at $938/ounce. The Put to Call ratio closed at 0.86. The VIX Index closed up at 29.03 but not until it hit a low of 26.57 earlier in the morning.

Market Summary for May 4th and looking ahead

The markets are getting many to believe that they better get in as the train is leaving the station, but they are still timid, as low Volume says they are still waiting. There definitely is nibbling going on. I look at Insider trading daily and notice that the Insiders are still selling to raise cash, over buying, by a large dollar volume. My guess is that Hedge Funds may need to raise cash too and so there will be some selloffs into rallies but not to scare us. That is why this advance is so steady. It has not had the volatility one would expect given the past 6 months. The VIX index has been steady between 34-39 and much lower than the upper 40's to 50's level it had been at. The new money has come from funding of retirement accounts by April 15th but some will put this money into more secure investments and so this source of money to drive the market higher is about spent.

The Put to Call ratio is hanging more closer to the lows of the past 6 months than the highs from around 0.65-0.85. We are in the Dow range of 7,800 to 9,300 level we had been in before hitting the lows of 6,440. I do not see us going to 9,000 on this move up. I do see it at about 8,500-8,600 max and then a pullback. So I have decided to hold on to TZA and FAZ and ride this move up to its conclusion. I know when I am tempted to sell without supporting data, in this case high volume, we are close to the market move in the other direction. Therefore, I will Hold and not sell my ETF's, TZA and FAZ, but wait for them to be back in favor.

Market weekly summary and outlook for week of April 27, 2009

Market is now flat from where it was 2 weeks ago, on April 9th. The Dow closed yesterday at 8,076. Two weeks ago it closed at 8,083. The Nasdaq closed yesterday at 1,694. Two weeks ago it closed at 1,652. The S&P500 closed yesterday at 866. Two weeks ago it closed at 856. So while there looks like we have a trend up, in fact, the market has stayed in a very tight range for the 2 weeks.

The Put to call Index closed yesterday at 0.91 where 2 weeks ago it closed at 0.81. The VIX Index closed yesterday at 36.82 while 2 weeks ago it closed at 36.53. I would say that those are pretty close too.

Gold closed yesterday at $914/ounce and 2 weeks ago it closed at $890/ounce. This is a 2.7% gain. The Dow didn't gain anything, the S&P500 gained only 1.2% and the Nasdaq gained 2.5%. Technology did the best in the markets, but not as good as did Gold. I have said to watch Gold prices to get a best sense of direction of the market. If Gold goes up, the markets will drop and if Gold drops the market should go up. I think there is a trend building for Gold's continued rise, going forward.

All this while we learned the earnings of a number of companies, the metrics used as a basis of the stress tests for the Banks. The results so far suggest Banks may need to raise another $1 Trillion of Capital. There was also the release of the memos on Torture by President Obama this week, which by the way was a good decision and a necessary step in moving ahead with this mess. And we passed the April 15th deadline for paying our taxes, the retirement accounts are flush with new cash all looking for a new home to invest in. It might be a part of the reason the market did not pull back much, as there were buyers at every moment the market did. Eventually we will have a breakout to the up or downside.

So I am still of the same mindset: We have been testing the upper bounds of this range now for several weeks and unable to get above it. Only time will give us the answer. I am staying with my ETF Ultra Short, TZA, as, until we know for sure the direction, it is still a better possible rate of return than other investments I see right now and it does hedge against a significant market drop. Preserving cash and capital is what should be your priority. Much uncertainty ahead. This is a marathon not a sprint. And of special note is that it has been observed and reported that Insiders have been selling into this rally. For more on this click here.

Right now I am pleased where my own portfolio is and I want to protect gains I have made, hence the ETF Ultra Short, TZA. You do what's right for you here. No one really knows what is going to happen but in another week we will learn how the market reacts to the actual results of the Stress Tests for the Banks. We will also be getting the results of the Unemployment rate for April on or about May 4th. So news will lead the markets and are unpredictable.

Don't forget to vote in my Mini Poll on the right if you haven't this month. Thanks for stopping by. Come again.

Predicting market direction: It's a lonely sport!

Just for the record, I bought more shares of TZA today at $31.30/share taking advantage of the move up today in the market. I was rewarded for this purchase so far, as the ETF, Ultra Short Triple play, TZA, closed at $33.65/share. The Dow closed at 7,887. The Put to Call closed at 0.78 and the VIX Index closed at 38.10, while Gold closed up today to $893/ounce. Where is the market headed? Why am I buying Shorts?

Wednesday's market action doesn't change my outlook

That's right. The piece of data which did not produce results was that of Volume. Today's volume was less than yesterday and to have a rally one can believe in you need to have today's volume surpass yesterday's and it was clearly less than Tuesday. The VIX Index dropped more today closing at 36.17. The Put to Call ratio climbed back up to 0.96 from the low from the previous days. I expect volume to increase tomorrow to the high for the week and then beating it again on Friday, Options Expiration. Unless we have a breakout to the upside on high volume, I believe next week we will pull back. However, many have funded their 401K's and IRA's at the last minute today so there is money to buy if investors are so inclined.

Market update April 9th, 2009

The stock market has been dropping slowly the past few days. It hasn't been with the wild swings we have come to expect, although yesterday had a 200 point swing on the Dow and closed down 180 points, closing below the 7,800 level at 7,790. The good news is that Volume has been down this week compared to Monday and Tuesday last week. So today is an important day as we really need to close above the 7,800 as it is a slippery slope down from here.

The Put to Call ratio has risen the past few days to 0.96, and while not high gives a chance to have the markets rise today. Cooperating in that endeavor is the VIX Index, which a measure of market Volatility. It closed again at 40.39 yesterday, off its high of 42.50 yesterday.

The government is extending loans for troubled institutions from 3 to 5 years which is helping ease concerns and last but not least, President Obama is back from the G-20 meeting in Europe and the side trips he took to Turkey and Iraq. It will be good to see him back on the economic issues, as these are his number one priority.

Earnings announcements will be the focus over the next week or two as to the real health of the economy. But they too are a look backwards. Watch for markets to react positively even when there is bad news from a company, as the news wasn't as bad as expected. We are in limbo right now and the trend still is not clear if you look at the 1 year chart of the Dow and S&P. We need more time to play this out. Stay tuned!

Markets and politics: Where are we going?

A review of yesterday shows the VIX closed at 43.68, showing the increased volatility I expected because of the approaching Options expiration today. The Fed took major action to buy back long term debt which caused an unprecedented increase of $60/ounce in Gold. The Put to Call ratio closed at 0.77 on Thursday, up from Wednesday's 0.65 closing level.

I think all in all it was a good thing the market pulled back yesterday because we were rising on a very rapid rate. Today I expect more volatility and while I can't predict today's market move, even though Futures are pointing for the market to be up today, I see the market continuing with this rally into next week and eventually over the Dow 8,000 level and the S&P 500 over 800 as well. The Dow closed yesterday at 7,400 after hitting a high during the day of 7,548 and the S&P 500 closed at 784 after reaching a high of 803 for the day. I believe this rally will end somewhere between 8,000 and 9,000 which is the range of where it has been previously. Because we went to the lows of 6,500 on the Dow I expect the rally to end between 8,000 and 8,500 and most likely not go higher until we have gone back and retested the lows.

Congressional action is the main unknown right now. The latest focus of their intellectual capital is on the AIG bonuses and outrage the voters have shown on this matter. They were caught, along with Tim Geithner, with their pants down, as in calculating which position they should take, they thought it better not to be sued over breach of contract for not paying the bonuses, than to pay them. They were all wrong. Mistake made, lesson learned and now, like adults, they all should get on with the issues on better oversight banking and insurance regulations, improving the economy, helping stabilize the banking system, managing healthcare costs, a better Energy policy which includes more Wind and Solar, as we surely have some whopper problems to solve as a country.

Pre-Market outlook March 18th: Cautious (UPDATE)

It's a good feeling to be able to guess correctly the markets direction over a number of days. I wanted people to see their 401K's and retirement accounts grow a little as it has been painful for many. The Dow closed today within a few points of 7,400 and the S&P 500 closed at 778. The VIX Index closed at 40, which a long way from the 50 level we had experienced for such a long time. The Put to Call ratio closed yesterday at 0.78 or just slightly down from 0.80 level on Monday. Gold ended the day yesterday at $916/ounce and in pre-market is at 902.

The news of the day yesterday was the level of bipartisanship surrounding the outrage of the bonuses to the AIG employees from the Division who were responsible for the collapse of AIG and required subsequent bailout by taxpayers. These contracts for these bonuses were in place during the Bush Administration and were known about apparently by former Treasury Secretary Hank Paulson, according to news reports. But the outrage from both sides of the aisle enjoined Democrats and Republicans for the first time since President Obama took office. Many are speculating that Tim Geithner, Treasury Secretary, may have his own job at risk for not stopping these bonuses from being paid. We shall see.

Again, the news seems to be favorable enough, or not negative, to continue with this uptrend. However, we are now approaching the final few days before Friday's Options Expiration and anything can happen in Options week. Yesterday I purchased additional shares of Citigroup to add to my original position which I bought at $1.73/share. Today's purchase was made at $2.41/share.

The Futures point down this morning as the CPI Index came in at up 0.4%, which was higher than expected and may foretell of a rise in inflation. Also, today is day 2 of the FOMC meeting of the Federal Reserve and investors are nervous as to what they may say later today. My guess is that the market will open down and stay down most of the day. Having said that I am hoping for a reversal in the final hour or so to have an up day.

UPDATE: 8:15am

Dow has been down all morning from -135 to -89 points where it is now. The Dow seems to keep trying to climb back up and over the 7.300 level. However, Citigroup has surged today making my purchase at $2.41/share yesterday look brilliant as it has hit a high of $3.30 and currently is sitting at $3.19/share. I predict this stock is going to go to $5/share or higher, if the market continues its climb back to over 8,000. This also is worth mentioning. I had to sell my Apple shares at $96.35/share and it was a difficult decision as the stock was still going up. Today the stock is at $100/share so I left $3.70/share on the table when I sold it or a 3.5% potential gain. But I used the money to buy Citigroup and today alone it is up over 25% and 30% from my purchase at $2.41/share. The moral of this story is this. Be willing to move a portion of your money to a faster or more rapid growing stock you have researched or discussed with your financial advisor. It opens more opportunities for you but also adds more risk. I saw Citi with less risk than most other stocks, including Apple, because the government is backing Citi and owns about 40% of the company. The government is making money on Citi right now, why shouldn't you!

Market Outlook for the week of March 16th, 2009 (UPDATE)

Well I got the action right this past week for a change. Shear luck. But the real difficulty is predicting this next week. Let's take a look at a number of data points to glean some prognosticative abilities. The Dow ended the week over 7,200 to close at 7,224 on 4 consecutive days of very strong volume. The S&P500 ended the week over the critical 740 resistance level, closing at 756. Both Indexes closed over their 20 day Moving averages, but just barely.

The VIX Index closed at 42.36 after hitting an intraday low of 40.03 and it hasn't been at this level since the end of January. It remains below the 20, 40 and 60 day Moving average. The Put to Call ratio ended the week at 0.71. Click on the Chart above to see the trend from January 2008 to close on Friday. You will notice most recently the trend is down. When the Put to call ratio is low it is a sell signal and when it is at the highs it is a Buy signal but what is high and what is low is all relative. As I mentioned on an earlier post, back in the year 2000 I would use the Put to Call to time trades. But back then the lows on the Put to Cal ratio were as low as 0.3-0,4 and often signaled to me to sell. They were just a bit outside 2 standard deviations limits from the rest of the data. And on the opposite side I would recommend Buying at the 1.25-1.35 level. You can play with data yourselves by clicking on this CBOE link and selecting "CBOE Total Exchange Volume and Put/Call Ratios". The data goes back to 2003 to now on a daily basis.

The Candlestick pattern of the Dow on Friday was a Doji which shows a struggle between the Bulls and Bears for direction. It also implies a possible change in direction. And one last point about the chart pattern and where we are. We had reached a new bottom in the market a little over a week ago when the Dow hit a new low of 6,440 and the S&P hit a new low of 666. We have not retested those levels and therefore most likely will need a retest to insure we made a bottom.

So if I were a betting man, and of course you know I am, considering all this data, if we get any bad news this coming week we most likely will reverse this movement up. If on the other hand there is some surprise good news this week, the market will continue to rise. Eventually we will drop back and retest the lows. So this is at best a trade, not a Buy and Hold. The only decision you must make is when to sell to look in a gain and how long to ride this up. Technically we could go to 8,000 or above before we come back down to ground and retest. So take a measure of your fortitude and your level of risk taking, as you will be tested this next week to make a decision.

Ford closed at $2.19 on strong volume, but also closed Friday with a Doji candlestick pattern. It is up $0.30/share from my purchase or 15.8%. Apple closed at $95.93 also with a Doji pattern and is up over $12/share from my purchase or 14.5%.

The ETF's SSO and TNA recovered some of their devastating losses this past week. TNA closed at $15.07 also with a Doji Candlestick pattern. I had purchased TNA at $23.36 although I have added to my position with shares at $11.35/share to bring the average price down. SSO closed at $18.08 also with a Doji Candlestick pattern. I had purchased these shares at $21.57/share so I am underwater on both of these investments. But I still am holding them. My strategy will be that when I think the market is about to turn, I will purchase TZA to hedge the gains I have made back on TNA and SSO. My signal will be triggered by looking at the Volume as it will indicate the timing.

I don't know if this is too much detail for you on how I think about decisions regarding the stock market. Let me know by making a comment. I can post less and just tell you my conclusion or I can share the details of my decision making. The default position is this, if I don't receive comments, I will just post less details. Thanks for stopping by.

UPDATE: Monday Pre-Market

The Futures show the Indexes going up today, continuing the gains of last week. The Nikkei was up in overnight trading and the CAC, DAX and FTSE indexes in Europe. Last night on 60 Minutes, Fed Chairman Ben Bernanke gave the first ever interview on the program to explain the financial crisis and how the Fed stood ready to do whatever is necessary to maintain the Banking system. It was a very good interview and showed the man was from a small town and understood what it was like being from the Middle Class. He should be commended for taking this unprecedented step to help average Americans gain confidence in the government and the Financial system. This should be good news to the markets.

Pre-Market March 11th 2009: Quiet but up

Market looks quiet this morning but the trend and Dow futures point up. One surprise this morning is that the 3 Month LIBOR rate has been creeping up from a 1.09% to now at 1.33%. Hopefully this will not go higher as it can freeze credit more if it does.

Put to Call ratio yesterday closed at 0.73 and on Monday it closed at 0.74. The VIX Index closed yesterday at 44.37 which is substantially lower than the latest highs in the mid 50's. Markets in Germany and France, while the UK FTSE is down slightly. The Nikkei rallied last night, rallying for a gain of 321 points and closing at 7,376. Gold is up only about $2/ounce in pre-market and is just below $900. All in all, I believe the markets will still rise and the rally continue the rest of this week.

Double Witching Friday: Will the stock markets hold? UPDATE

This is the question of the day and many are nervous it won't. There isn't much data to point to, to answer that question. The only data I could bring forth today, as a piece of encouragement, was that the VIX Volatility Index closed at 47.08, down 1.38, as it still stays under 50. When the Volatility Index comes down it doesn't mean that markets will go up, it just means that people aren't panicking and selling like a mob, they are much more calm about it.

This latest market drop, back to the November lows, looks well managed, in my view. The daily moves are modest and not like what it was like when we first reached the lows, back in November, when the VIX was between 70 and 80. I tend to think it is Wall Street wanting to send a message to the politicians in DC that they don't like what the Obama Administration is doing to solve the Credit crisis, the Mortgage crisis nor the Stimulus package. The problem with this point of view is all those voices have come up with no new ideas other than reducing taxes. It is the only action most right wing Republicans can come up with.

So I still believe we are going to hold around this current level. We may go as low as 7,200 on the Dow, When I first put the chart together projecting the lows of about 7,300 when no one thought we were ever going that low, I also said it could go to 7,200. The reason for the discrepancy was that the uptrend line which I constructed and analyzed started from about 1975 to the mid 1980's. I did not enter all the data in a spread sheet and use an equation to determine best fitting line. I used existing charts for the period of 1970 to September of 2008 and drew a line that while imprecise hit at around 7,200 to 7,300. So when I said we will hold, I really believe we will. We just need to get through today rightfully labeled "Double Witching" for this month's Options expiration. It will be a measured test not a panic drop but the shorts want to extract every penny they can from these lows. Keep the faith!

UPDATE: 8:45am PST.

Well we have gotten as low as 7,311 today and still appear to be holding, and the S&P 500 has gone as low as only 762, which is also good news. The VIX has risen to as high as 50.36 but went back below 50 again.

UPDATE: 10:00am PST.
I wanted my readers to know what I am currently doing. I have just purchased additional shares of the ETF Ultra Long of the S&P 500, symbol SSO for $18.48/share and also purchased additional shares of the other ETF I own, symbol TNA, for $17.49/share.

The VIX is now up over 51 and the Dow is down to 7260.

Market action week ending Dec. 26th

Well a very quiet week in the market as volatility calmed and the VIX Index dropped to 43.38 to close out the week. The Put To Call ratio ended the week at 0.78, which is much lower than it has been these past 2 months. It has been as high as 1.47 since October. All 3 Indexes are below their 20 day Moving averages, and to me that adds to my confidence that we are headed lower in early January.

Not enough volume to draw any conclusions as to emerging trends. We are in a tight range and will stay there for the next 4 market days next week. It is time to raise cash and pay any bills to reduce taxes you might need to pay this year. I will pay my Property taxes in full before year end. Besides the State of California is almost broke and probably need the money as soon as they can get it. For those not familiar with statistics regarding California, the Unemployment rate is currently 8.7% compared to 6.7% nationally.

Happy New Year. See you back here often. I try to publish something daily but don't always succeed. Leave a comment and don't forget to vote in my Mini Poll on the right margin about the recession.

Market Outlook for next 3 plus weeks

Well the week was a calm one with the range on all 3 indexes much tighter than in previous weeks and months. It got everyone settled down but it was difficult to make any money in the market with such a tight range. We have not been able to get above the 60 day Moving averages. We have settled in between the 40 Day and 60 day Moving averages. With the coming slow 2 weeks of the holidays, I don't see much going on except tax loss selling by individuals. Then in the first and second week in January I see a pullback in all three of the Indexes.

The main indicator for what was happening this week was the Volatility Index, symbol VIX. It went down to close at 44.93 for the week. It opened the week at about 56 and closing at about 45 results in a 20% reduction in Volatility. We are not yet back to the August lows of 20 but the trend continues down. As the Volatility Index drops, it is more difficult to make any money on Index trading of the Dow, Nasdaq or S&P 500. So that is why for the week the ETF's didn't gain much nor lose much. I am hoping for a breakout the first 2 weeks in January. That will be the time to cash in to the upside should that be the direction or to the downside, which I see more likely.

Several stocks I watched this week were these. Ford for example has not returned to where I sold it, $3.26. The bailout created some buzz at the opening but then fizzled as I had predicted. I also own a stock called Beacon Power, symbol BCON. It has been shorted since July and that has driven the price down significantly. But there was life returning to the stock this past week on increased volume, a good sign. I look in the coming month for a retest of the lows in MGM timed with the market drop. I have heard the impact continues on the Stip in Vegas so I think they will have a disappointing holiday season.

Unemployment is rising with no relief in sight going forward. This is going to have a continued negative effect on the psyche of everyone. Just yesterday while Christmas shopping I overheard people talking about the poor state of the economy, their jobs and concerns they would get let go by their employers but were going to buy a few small presents for their kids anyway. I have never heard anything like this before during Christmas shopping. I heard similar conversations in 2 separate stores. That stinks. Let's at least try to be more positive out there folks!

Merry Christmas, Happy Hanukkah and Happy New Year.

Near the end of the market drop and the beginning of restored confidence

We are closer to the end of this market drop than we were a week ago. Back in the Fall of 2002 through to March of 2003 we hit the bottom of about 7,200-7,400 level on the Dow. That is the bottom and with each day and another notch on the Index marking the time, we keep getting closer to the end of this market crash. As the Dow approaches the 8,000 level it will be a time to start selectively buying stocks again. We can all help shorten this downturn by the actions we take collectively. That means not over reacting to news. The volatility we have recently seen as determined by the VIX Index, are a result of investors emotional swings of fear and greed to the extremes.

Many have asked me when do I believe that confidence will start to return to financial markets. My answer is very simple. It's November 5th, if Obama gets elected President. If McCain gets elected confidence won't return for a very long time, years is my best guess. There are 12 days left before the election so make sure you vote early and avoid the lines in States where voting early is allowed.