Ratios to Reason $SPX

A weekly look at 5 indicators that depict the current market environment.

$BPSPX:$VIX = 97.31

$BXM:$SPX = 70.22

$CPMKTE:$CPMKTB = 39.67

$SPXA50R:$VIX = 87.58

$SPXHILO:$VIX = 15

The only glimmer of bullish hope my indicators offer is a 50% increase in the $SPXHILO:$VIX since my last analysis here. Otherwise, the bear market remains intact, and until the VIX can make a sustained move down, I suspect we will see increased market weakness. I'm eager to see how Barclays new volatility ETN's will trade, especially in light of the markets lack of confidence in their risk management, reflected by the $3 stock price. New products offer new strategies, and though their entry seems late to the party, the potential for increased diversification is wonderful.

Ratios to Reason $SPX

In an effort to create more structure for this blog, I'm re-posting 5 charts that depict various trends within the $SPX. In the future this selection will be posted during the weekend.

$BPSPX:$VIX = 139.61

$BXM:$SPX = 68.88

$CPMKTE:$CPMKTB = 41.34

$SPXA50R:$VIX = 122.16

$SPXHILO:$VIX = 10.9

Why am I regurgitating this mass of pretty but confusing information? The charts represent aspects of the market that are not revealed by the price of the SPX. 3 of the 5 graphs relate percentage:volatility, and currently they are bearish, trading in downtrends towards 0. If you're buying stocks, it's prudent to wait for a growing number of bullish stocks trading above the 50dma making new highs.

The other two illustrations are a bit more conventional. One measures the spread between a buy write strategy and the underlying index, creating an inversely correlated derivative of the SPX. Lastly, $CPMKTE:$CPMKTB is the relation between US Equities and US Bonds, useful for discerning the appetites of investors. Both of these indicators are signaling more downside to come.

In time, I hope to find a better method of aggregating the information presented in these graphics. Any suggestions towards such an end would be greatly appreciated.

Signs of the Times $SPX

I'm a huge fan of percentage/volatility charts, but due to their underwhelming popularity, they're confusing. Hopefully someone understands their value besides myself.

Although my NASDAQ indicator has gone bearish here, the SPX is holding on for dear life. There are fewer bullish stocks and volatility is rising, buyers beware.

The BXM/SPX spread has broken resistance and is running to the upper Bollinger, something to interpret as increasingly bearish.

The percentage of SPX stocks trading above their 50dma is falling and volatility is increasing. The environment is growing more difficult for investors.

SPX stocks making new highs are dwindling amidst the rising volatility, another reason to be careful if you're buying stocks.

The one glimmer of hope seems to be the rising number of NASDAQ stocks making new highs, but since this is based on a 10dma, I suspect it will turn down soon.

Investors should get defensive as traders look to short this weakening market. Real estate and financial companies could see another round of selling, and I'm keeping a close eye on the price of preferred shares via PFF or other ETF proxies. The energy sector looks weak as well, so trade what you see and not what the pundits spew.

State of the Market

The market continues to rally as the Fed lowers key lending rates.

Rate cuts are having a negative effect on US bonds relative to foreign ones.

Up volume significantly outweighed down volume, continuing the bullish theme.

More stocks are trading above their 50dma on lower volatility.

New highs are becoming more prevalent as this index makes a new X.

The oddest thing about today's action was LOWER treasury yields... What The Fuck?!?

The action in Treasuries is mystifying, but it isn't stopping me from trading gold and silver related stocks. The USD has been getting trashed, and while I expect a few bounces, the writing is on the wall. We're still in high risk territory, and the whipsaws will continue, but I'm buying the dip in the strongest sectors.

Volatility Charts

Fortune favors the bulls as the rally continues.

More stocks are getting bullish and the volatility is dropping.

Stocks above the 50dma are increasing, but we don't have a confirmed trend.

There are an increasing number of stocks making all time highs, but it's still meager.

The spread between short and long term volatility is normalizing, but it may indicate complacency.

Risks are still high, but a proverbial toe in the water won't drown bullish speculators if they play the right sectors. Staples, Telecoms and Heath Care aren't moving, but Basic Materials and Energy are flying high. The bond market continues to exhibit a flight to quality, so remain cautious.

Wednesday Wrapup

The short term uptrend grows stronger by the day.

The Bullidex (Bullish Percent Index / Volatility Index) has finally registered some new X's.

More stocks continue to rise above the 50dma on decreasing volatility.

Finally, an increasing number of stocks are trading at new highs.

Market internals continue to strengthen as an increasing number of stocks are rising with less volatility. With many companies trading at low valuations, unprecedented levels of liquidity, and a psychologically stunned general public, the conditions remain optimal for a rally.