Year end summary of the Dow and stock market trends

This is my year end summary of the stock markets for the year and where I think what might occur in 2012. My first chart below is of thew Dow for the past 10 years on a monthly basis. As you can see below, for 2011 the Dow managed to stay between 11,000 and 12,800. Looking at the big drop in 2009, where we went all the way down to 7,000 on a monthly basis and 6440 as a low daily close.

It is interesting to notice the Volume chart for the Dow. We averaged about 600 Billion shares a month from 2002 to mid 2009. Since then we have had a significant drop to 380 Billion shares. So the rise from 7,000 was built on significantly less volume than the rise from 2002 to 2009, which was a Bull market rally. It looks to me that since 2009 we have been in a Bear Market rally, as the volume has been too low for a true Bull rally.

The key to watch on this Dow chart are the 2 red lines. We will need a breakout either to the upside or to the downside to determine longer term trends from this chart alone. However, looking at the Dow 25 year monthly chart, we get more clarity, as seen below.

I do still expect a drop below current levels during 2012. The Head and Shoulder patters or "W" pattern as I call it does point to lower lows going forward and limited upside potential.

Given the chart readings, the next thing to do is see if world events suggest a more optimistic or pessimistic view for 2012. We have a Presidential year election in November 2012 and we have had gridlock in the Congress in 2011. I don't see the gridlock easing and many issues including our own debt which must be dealt with as well as continually funding the government. The Unemployment scene isn't going to get much better because we have structural unemployment which will be around for a long time unless somehow we retrain workers in new skills to meet a more technological demand than typical blue collar workers have brought to the work environment. We also have the Supreme Court making a decision on President Obama's Health care bill legislation as to whether it is Constitutional or not.

Then we have the Sovereign Debt issues in Europe, the Arab Spring and new leadership in North Korea, a test of the government of Iraq to function without our military presence and then there is Iran's pursuit of Nuclear weapons. The Euro is in crisis and Russians are challenging Putin's grasp of the presidency there. And last but not least, we have all those who believe the world will end on Dec 21st 2012 because of the Mayan predictions.

Let's conclude with the fact that 2012 will have many volatility swings ands most likely testing the previous extremes of those swings. It is a year to be cautious with your financial assets. My belief is that we humans will do almost anything to avoid pain rather than to risk succeeding. Therefore, I believe it is wiser to be on that side of the investment strategy by being short from time to time. It is also wise to take profits sooner rather than being greedy and waiting for more profit before selling.

Good luck this coming year. Thanks for taking the time to visit my Blog. This new year marks 7 years of my blogging. I have had 79,000 visitors to my site in that period. Happy New Year!

Market comments for Oct. 12th, 2011, Columbus day

Say what you like about this rally, it has surprised everyone, including me. I had to look at the chart this morning to see just how high it has climbed back up from the bottom and to see whether I think it will hold. The chart below shows it was a rise of about 8% in 7 trading days. However, when I look at the very low and dropping volume, I am very suspicious of this rally and it appears to me to be a another bear trap. Here's the chart. You decide!

Market comments for Sept. 23, 2011: Another down day

The stock market is going to open in 1/2 hour. The Dow Futures are down another 110 points pointing to a lower open. As a reminder of where we are now, I have included 2 charts today. One is of the Dow and the other is for Germany's DAX index. I have placed an "X" on the Dax chart to where the market is currently as its market is open. The DAX is very close to the 5000 level. The German DAX is trending clearly down from the red lines I have drawn. Our Dow chart matched the recent low and I fully expect all our Indexes will go lower. We are in the second inning of a 9 inning game and more is to come to the downside. As I have stated before, this drop will not be straight down as there will be days up. So it will look more like a zig-zag pattern. I am pretty confident the market will close down today because no one wants to buy stocks today going into an uncertain weekend. Also, yesterday's volume was heavy at 300 Million traded on the Dow.


Here are the charts:

Market comments for Aug. 12th, 2011 (UPDATE)

Yesterday we did rally on the lower Initial jobless Claims data, but let's be honest here, the data was not that great for such a strong rally. Yesterday's charts give conflicting signals to me for a short term read on direction. I have put together 4 charts for today. One on the Dow, one on the S&P 500, one on the Nasdaq and finally the last one on the Russell 2000. I have drawn some lines on each chart. Some show that the trend looks down from here, others show up from here and one shows stagnant and staying at this level. So we will need more days of data for clarity. Here are the various charts:




From these charts above you can see that the long steep downward move hit a bottom, rose back up a bit dropped again and then rose up again. This second move up did not convincingly go much higher than than the first bounce. In fact, depending on which index you look at, the Dow actually came in below the first bounce. I will need today and tomorrow's market action to get a better sense of near term direction. The Volume though has been extraordinary for a summer month.

Also, of interest from yesterday's Volume was the chart below of the Dow in 1/2 hour increments and the Cumulative volume up to that time. In the last 1/2 hour yesterday, the Dow traded 146 Million shares!


Retail Sales data released this morning for July was +0.5%. Expectations were for +1.0% and the data from June was only +0.1%.

Michigan Consumer sentiment data will be released in 1 1/2 hours and I will post it as an update. Futures initially responded slightly up from the release of the Retail Sales data.

UPDATE: 7:01am PST

Consumer Confidence came in at 54.9, which was the lowest reading since May 1980!! When the data was released it reversed, from being up 140 points on the Dow to being up only 50 points. This is a contributing factor to why the Fed most likely thought they needed to keep interest rates very low through to 2013. To put today's number into perspective, last month Consumer Confidence came in at 63.7 for July.

Market comments for Aug. 11, 2011 (UPDATE)

It's a big day for data release at 5:30am PST for Initial Jobless Claims. In addition, we broke below of 11,000 on the Dow. So far we have not held above 11,000 and so as each day goes by, one must conclude the market is at risk to test Dow 10,000 eventually.

From the Dow charts below, you will see we did rebound after the sharp decline and then the rebound followed by the retreat to a lower low. The Dow closed Wednesday at 10,719. The low for the day was at 10,686.


Volume was high again with a 520 point drop. If you look at the chart below, I took readings on volume for the Dow starting around 11:30am PST and recorded the reading of the Dow at the same time as I recorded the Volume. From the intraday Volume/Dow chart below it is clear that as Volume increased the Dow drop accelerated. So there was a lot of selling behind this market again Wednesday.

My expectation for Thursday is that if the Initial Jobless Claims shows a sharp increase to say 420K or more, the market may sell-off again! However, if the Initial Jobless claims come in at 400K or less, we may have a rally and retest the 11,000 level. Remember there is a predisposition for the market to decline rather than recover right now.

But let me be clear here, we are headed lower, as I have stated many time here, this past week. Just check my previous Blog posts for the last 7 days.

UPDATE: 5:31am PST Aug 11th

Of particular note this morning is that France's CAC 40 Index has slipped below 3,000 while Britain's FTSE is now below the important 5,000 level as we awaited our Initial Jobless Claims data. Our Nasdaq Index is getting to testing the 2,400 level as well, after its decline yesterday. All of these are major psychological levels for investors. Our Dow Futures have been down about 140 points since our premarket opened at 5:00am. Gold Futures Margin requirements have been raised by the CME (CME is the world's leading and most diverse derivatives marketplace).

The Initial Jobless Claims number came in at 395K for week ending 8/6. That's down 7,000 from the previous week. It is a better number, but only slightly. The question is now whether the market will rally on the news. Our Trade Deficit came in at $53.0 Billion in June compared to $50.8 in May.

And finally, leaders of the Senate and the House have selected their representatives to form the Committee, which is charged with the task to come up with Spending cuts and any revenue (tax) increases by November 23rd. Many point to the fact that none of these people chosen in the Senate were members of the Gang of Six, who worked for 10 months and came up with many recommendations for spending cuts and tax increases in a bipartisan way. They knew where the money was as they studied much detail in the budget numbers and were quite familiar with where to get the money from. So there doesn't look like much hope these members will come to an agreement in time.

Market comments for June 24th

Which way will today's market play out? That is what I have been asking myself. The market had been down over 200 points yesterday but managed to stage a comeback and close down only 59 points on the Dow. But as you can see from the 3 month chart below, there was a definite Sell signal confirmed with a Hammer Candlestick pattern not only for the Dow, but also for the other major indexes like the S&P 500. Notice also the higher volume yesterday on the lower chart of the Dow 3 month chart.

But still the market did save over a 200 plus drop in the Dow and that gave me pause. So I pealed back some of the data to see what the charts are telling me going into today. Below you will notice a 2 day chart of the Dow in 5 minute increments. This chart clearly shows the surge back up from the lows and does show a slanted upwards "W" pattern or Head and Shoulder pattern going into the close.

So as we are within a few minutes of the open, I believe today will be a struggle between the Bulls and the Bears for control. Watch the range be tight for most of the day as the Volatility will drop. Watch volume as it should be less than yesterday as well.

There are still major issues to be dealt with like the impasse of the Congress to raise the debt ceiling and you know all is still not well in Greece. So if I had to bet, I would say we have a higher chance of ending down today than up. Of course, on the other hand, the Fed still has some influence in manipulating the market with still some funds left to spend before the end of June. Maybe we should all just go away and come back in the Fall after all. :)

Market comments for June 17th: Put to Call ratio analysis

Something a little different today for my most faithful readers, I have some charts you will only find here. I have recently been comparing the period of June 2008 to June 2011 because we have recently logged in 12 days now of the Put to Call ratio exceeding a 1.00 reading. I thought today a bit more refinement was in order to see what can be learned from a more in depth analysis.

To start with let me explain some of the data. There are Options of Puts and Calls taken out on stocks (Equities) and on the Indexes, like the Dow or S&P500. When I have reported to you that the Put to Call ratio has exceeded 1.00 for 12 consecutive days, I have included all of these Options in a Total reading. Today I am going to break down Equities from Indexes and am going to look at 2 periods, all of June of 2008 vs. June 2011 to the close yesterday.

Below are 4 charts. 2 of the charts are of the Equity volumes for 2008 and 2011 and 2 are for the Index volumes for 2008 and 2011. As you can see from all 4 charts that only one chart seems to have a real trend and that one is for Index Puts and Calls, (that is the first chart) and that the volume not only is trending but also that it exceeds all other Options Volumes for both periods.




To me this means that the biggest bets being made right now are being made for an overall market drop, hence the Index Put options rising to significantly higher volumes in 2011 than in 2008, before the major market correction down to 6,500 on the Dow. It seems to me that this time people are putting their money where their mouth is. Traders see that it isn't specific stocks which will tend to be hit in a correction, but rather the entire market. That is something to take note of.

UPDATE: 7:52am PST

Also of significant note today is that Options expire for the month of June and for the Quarter. 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. This is why the Volume is already over 148 Million shares in just a little over an hour this morning.

The Michigan Sentiment Index came in below expectations this morning for June. A reading of 71.8 is below expectations, which was 73.5 and below last month's 74.3 reading.

Market comments for the week ahead and beyond

Let there be no doubt, the Dow will go as low as 11,600 shortly. From there we may have a bounce up but the odds are we will continue to see this and the other stock market indexes drop lower because much concern still lies with the issue of raising the debt ceiling. We have less than 3 weeks for this issue to get resolved before the markets start to get very nervous and volatile, even though we have until Aug. 2nd before the government defaults on its debt obligation and the government shuts down. The sides are still miles apart and it seems to be playing along in a similar game of chicken as to when Newt Gingrich was the Speaker of the House during the Clinton Administration. The Republicans miscalculated then and appear to be again now. Only this time the consequences our governments credit will face is much worse as the United States has never defaulted on its debt obligation. So you see this is very serious indeed.

I have added a 6 month chart of the Dow this morning as is seen below. Notice that on Friday, which is often a low volume day, the Dow was down 172 points at the close. Notice also that the Volume was indeed higher than the entire rest of the week.

Also noteworthy was the fact that the Put to Call ratio continues to be greater than 1.00 now for 8 consecutive market days, not seen since Sept. 9, 2008. All the signs are warning investors this is serious. Don't say you didn't know it would get so bad. You have been warned!

How far down is the market going to go is subject of many guesses. My guess is that we will be first going all the way down to the 10,000 level after testing 11,600. A look at the 2 year chart below shows just how easy the Dow and other Indexes can unwind. I have identified 3 levels to test in what could be a drop as far down ultimately to test the Dow at 6,400. Yes, that's right, Dow 6,400. You read that correctly. Much depends on when and what the Fed is allowed to do. If the Fed stops its quantitative easing (QE2) and not do more, we could get there sooner rather than later. If the Fed decides it needs QE3, this drop and crash will be postponed for a while, but it will be inevitable, we will crash to test 6,400 eventually. A defense will be better than any offensive market move going forward as the odds are against a Bull market now. Fair Warning! We are in a Bear market now.

Market comments for May 24th

Today I have added a little something different to the mix. I have found an interesting piece of news about the economy and where we are right now that I thought I should repost here. It is from Haver Analytics and includes a chart. Here it is and the title:

Chicago Fed Index Provides Further Evidence of Momentum Lost
BY TOM MOELLER MAY 23, 2011

The list of indicators suggesting that the economy's forward momentum has waned continues to lengthen. The Chicago Fed reported that its National Activity Index (CFNAI) retraced its earlier improvement and fell to -0.45 in April from a little-revised 0.32 in March. The three-month moving average of the index, which smoothes out some of the series' volatility, slipped to -0.12, the first negative reading since December. During the last ten years there has been an 81% correlation between the index and the Q/Q change in real GDP.

To read the entire article on Haver Analytics click here.

While yesterday's market was down and broke below the previous support line, as seen in yesterday's post on the Dow, the final Volume for the day was not that strong and indeed was less than the previous day's volume. Given this fact, today's market may bounce up somewhat, as Futures indicate. Watch today's volume for clues as to future direction.

Dow 30 year chart: What is it telling us?

As we begin a long 3 day President's weekend, I thought a look back on this stock market climb. At first glance the Dow chart below shows a downward slanting "W" pattern, or, as many technical people call it, a Head and Shoulders pattern. But while that's an important point of this chart as the recent climb has been impressive, what I want you to look at is the bottom chart which is of Volume over the past year. You will see on that lower chart an average volume red line but notice in the last year the volume has declined to a low of the past 10 years. When volume is strong and price is increasing it is quite Bullish. When price rises and volume declines significantly, that is quite Bearish. In this case, there is no question that the entire climb of the past year has been on very low volume. You see it has been climbing without the individual investor participation. This rise has exclusively been down by the Fed and it is not sustainable indefinitely. The longer this market goes up, the bigger the fall. Don't be greedy. Take your profits and be happy you have them. Keep what you have then in cash and just wait.

Click on the image to enlarge it if you can't make out the details.

Are the new highs believable? You decide!

I have looked at the Dow 3 month chart tonight and what seems clear to me is that while we hit a new high today on the Dow and the S&P, when you look closely at the Volume today, you can see that Friday was the highest volume day. Yesterday's volume was higher than today's volume, which means that today's volume was the lowest of the past 3 days. It didn't convince me that we are now in a Bull market as some have claimed today. Take a look yourself at the chart below and you decide!

Today I purchased more TZA shares for $14.27/share. I know, you think I'm crazy. :)

Stock market prediction going into January

I have been looking at the chart of the Dow and decided to look at a 6 month timeframe as it seems the market has been going straight up, although lately seems to be still strong. I wanted to determine whether the Bulls case is warranted and whether there are any signs visible to the average investor with limited knowledge that all might not be as good as all the talking heads are saying. You can't find anyone Bearish right now, except Robert Prechter and his Elliott Wave Theory. Well while I do like the Theory I also use other methods, as long term readers know. Besides the Put to Call ratio, which I like a lot as an indicator of a pending reversal in the market, I also like to use Price/Volume with the emphasis on Volume movement. Today's chart below shows the Dow 6 month Price and Volume movement over the period.

What you will notice from the above chart is that the Volume has been steadily declining over the period. That's the first note worthy piece of data. In fact in the month of December we are at the low on the chart. Even July had much more volume than did December and most are on vacation then.

The other noteworthy consideration is that the price has all but gone steady up on this lower Volume. First rule to observe in trading is that if you have price rising, volume needs to also rise if you want to have a Bullish condition. But if the price is going up and the Volume keeps dropping, as it has especially lately, it is a very bearish sign. Also note the number of recent days which have been distribution days, in red, versus accumulating days, noted in Black on the Volume chart.

To me the signal couldn't be more emphatic. This indicator is flashing RED in Neon lights. Does this mean that next week the market will tank? No, but it should make you wary as to how much you are invested in the market rising right now. There is better than a 50% probability that the market will be turning down soon. It is way overbought by any measure you use. Buyer be Ware! Don't say you didn't know. And ask yourself how can all the prognosticators except one, be on the side of the Bull at this time. And don't tell me it's the Fed. They only have so much they can do.

Market comments for the week ending Nov. 12th

Well as it turns out the Put to Call ratio did signal this week's drop in the market. The Dow dropped 252 points, but that is only 2.2% for the week. What was also amazing was that Cisco stock dropped about 17% in one day on the news they were going to miss analysts expectations, even while having a good quarter. But Cisco dropped more yesterday closing at $20.15 and hitting a low yesterday of $20.03 for the day. Cisco was as at its recent high of $24.50, before the earnings disappointment. So it has had a 17.8% haircut. Notice from the chart below the gap down but look more importantly at the volume traded. This has more to go down, depending on market conditions.

Now look at the volume during the decline this week and compare it to the previous volume average, from the chart of the Dow below. You will also notice that the pullback on Friday dropped us below the uptrend line. The big question is will it go back over it or continue to drop.

The market does look like it will go down further but it is anyone's guess how much and on which days.

Below is a 3 month chart of the S&P 500, which shows a similar pattern and the break of the uptrend line.

This coming week there will be more political banter, because the President is back from his Asia trip. There has been some deliberate leaked news about proposed cuts in spending and raising taxes from the bipartisan White House Commission on Fiscal Responsibility and Reform that President Obama had formed, which is headed by Erskine Bowles, and Alan Simpson. I think they had leaked these ideas out to the media so that commentary could start in advance of the President returning to Washington, and most likely will dominate the news along with any unexpected Financial bombs which come to light this week. The Irish Debt issue has crept back in the headlines in Europe and there is an uneasiness with the Fed's actions and approach with Quantitative Easing (QE2). Ever onward!

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.

Puts and Calls Total Volume and what it means to the next market trend

Ok, for those of you early birds for Tuesday morning, I have compiled some interesting charts on the Total Volume of Puts and Calls from January 2009 to the close of the market today. The first chart is of the total of all Puts and Calls. The second chart is of all the Calls only. And the 3rd chart is of all the Puts only for this time period. What is fascinating to me is that the overall drop in total volume seems to be more related to people buying less Calls, than Puts. If things are getting better in the economy and hence the market, which is supposed to be a leading indicator, wouldn't you expect there to be more purchases of Calls. That's not what the charts show. The average of the Puts and the range are much larger and wider than the Calls. It says to me that the real money is betting on a correction, not a major rally like we had in most of 2009. What do these charts say to you? Leave a comment. And don't forget to come back to see the Consumer Confidence data Update after they are released at 10:00am EST.

Where are we going?: Latest on the stock market trend both long term and short term

It's time for one of those posts where I take a very lofty view of the stock market and a minute view at the same time and explain to my readers how I look at the market from day to day when trading. To do this I have put up many charts staring as long as a 30 year chart of the Dow to as small as an Intraday of yesterday's trading. I hope this helps you at least see what I see. Let me start with the broad view using the Dow 30 year chart.

As usual, I will look at each chart observing "W" pattern formation. As I have noted here before, these "W" patterns are often referred to as Head and Shoulder patterns. I suggest you read up on on these patterns somewhere like Investopedia, which has a significant wealth of facts and lessons for any investor. Getting back to those "W" patterns, I will underline in red each "W" pattern I want you to be looking at and we will be looking for which way the slant of the line appears to be heading. If the line heads down, it implies the market will follow by going down below the bottom right leg of the "W". If the slant points upward, the market should go up.


Looking now at the Dow 30 year chart above, you will notice the "W" pattern of the stock price and the fact that it is slanted down. To me this means that although we have made highs of 11,000 recently and 14,000 before that, we are headed lower and should go lower than the previous low, which was at 6,400 on the Dow. That seems to contradict conventional wisdom by the "experts" on CNBC and others who have said any correction will go to Dow 8,000. If that were so, then the previous low would not have gone below 8,000 and there would be no slant of the "W" pattern. So that is one thing I wanted you to see along with me. But there is another interesting point to be made on this chart, but it doesn't involve the stock price, but rather, the Volume in the bottom section of the chart.

As you can plainly see, there has been 3 distinct periods where the Volume made a significant step up. I have drawn Blue lines to define each step. The first step was from 1980 to about 1988, the second step up from 1988 to 1998, and the last step up from 1998 to now. But in this last step, it looks to me that the Volume is increasing steadily over this 12 year period .Just think, the Volume was significantly lower just 10-15 years ago in the buildup to the year 2000 Dot.com bubble bursting. I don't know many investors who have increased their purchases of shares over these past 10 years and yet the Volume is over double the previous period. Part of the explanation could be that the bank shares like Citigroup, symbol C, have dropped in value so much that there are Billions of shares traded now compared to previous times, but that doesn't entirely explain it.

To me the only explanation is that the Government has been using its reserves to keep this market sustainable at these levels through firms like Goldman Sachs and others these past 2 years investing with nearly free money from the government. It's a way fro the government to make money too since the wealthy don't want to be taxed.

Anyway, I think this Volume will eventually drop as people get more scared and leave the market as their gambling table of choice. Any major market drop will scare a generation of investors away, as may have happened in the recent drop to 6,400 on the Dow. Ok, now let's move on to another chart.


This next chart above is off the Dow for the past 10 years. I have underlined several "W" patterns to show you again the predictability of this pattern at determining the market direction immediately after the "W" pattern is formed. Several of these in this chart show this to be true. You will notice the last "W" pattern I drew in red to the right of the chart appears to slant down. This will be clearer in shorter time period Dow charts to come. The other thing to look at on this 10 year chart is the volume spike near the low of 6,400, when Volume increases and price is dropping it is very bearish for the market. Same is true when the market is going up on high volume. However, if price rises on low volume, that too is bearish.


This 3rd chart above, shows the Dow for the last 1 year period. I have underlined a number of "W" patterns here as well. As you can see in this last period, the "W" pattern was flat. This implies the Dow moving sideways, not up and not down. It implies a tight range until the next "W" pattern emerges.


And lastly, the final 1 month chart of the Dow. I have drawn 2 red lines. Let's focus on the last one which points up. We can't tell much form this except that the market should go up from this latest rally the past few days, correct? However, the previous red line under the "W" pattern is slanted down and it has not yet been fulfilled. It may be a fluke. Remember I have said these aren't 100% accurate predictors, but rather about 90%. However, I conclude 2 things from this. First, is that while it might be a fluke, the Dow will not go too high from here. It possibly could go as high as Dow 10,500-10,600 range, as I have mentioned a few weeks ago. However, it may just fizzle out and return to another major drop on any negative trigger. I would be cautious trading here. And Volume is barely hanging in this past week at 200 Million shares where if you look at the 30 year chart it looks like the average for this period should be more than the 200 million shares.

So what do you do when the signals are mixed? I can't tell you what you should do, but I can tell you how I am thinking about it. Because the short term is so murky, I pull back to what I do know. That takes me to look at the 30 year chart. So while I mark time, I keep in mind that the overall trend will be down, so if I am going to buy any stock Puts, I can wait a bit and if the market rises, I should be able to get them cheaper. I most likely won't risk buying any stock Call Options either. And lastly, waiting until there is clarity is just fine as well.

I am sitting on a number of TZA Call Options. My latest purchase was for $1.55 each for a Strike Price of $9.00 for October. I also purchased some Puts on a Dow index stock I will keep nameless.

I hope this isn't boring and has been informative. Good luck out there. Next week the key Leading Economic Indicators I will be watching will be these:

Wednesday PPI, Core PPI, Housing starts, Industrial Production (expect PPI to be negative)

Thursday Jobless Claims, Consumer Price Index, Core CPI (Watch for Deflation in Core CPI numbers)

That's it from here. have a nice weekend. And remember, there is nothing wrong with taking profits and being in cash right now. It is the only safe place to be contrary to the hype out there in my view. To make this point further, click here on a video clip of Maria Bartiromo of CNBC's Closing Bell interviewing Bob Prechter of Elliott Wave International.

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.

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 update: Market up but Volume declines for consecutive days

As you can see in the chart above, the Dow 6 month chart shows that while prices have been going up, the Volume has steadily declined for each of the past 4 days. While I know that a market going up is some comfort to those who were scared last week, it is important to realize that a rising market on lower volume is a very bearish sign.

The second chart is a 1 year chart of the Dow and it shows that we remain below the previous support level and therefore the bearish setback is still present. I am using the rise to buy more TZA Call Options and to sell some stocks to raise cash.

Is the stock market trend up this week to be believed?

This week the markets have moved up steadily each day. The guests on CNBC and other networks are declaring once again things are getting better and while the jobs picture is still not recovered, we are doing better than we were a year ago. My goodness, with all this good news and the trend now going up in the markets, I should probably become a Bull and buy here, right? Wrong!

If you look at the chart above, the Volume is less than it has been when the market was going down just a month ago. This is not convincing to me. In fact it validates my conviction that it is an old con game designed to drive the market higher by enticing others to feel safe in the market only to have them get out at the top and the average person gets shafted again. Can the market go to 11,000? Yes it can. But is the enticement of a gain to the upside of the 500 points worth the risk of the market dropping 1000 -2000 points? I say it isn't, but heck, that's just me. You do what you want.

I am planning on doing a post soon with many charts you most likely haven't seen that hopefully will be illuminating. They will deal with historical data of the Dow, Gold, the US Dollar and the Core CPI among some of the correlations. Stay tuned!