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.

Ratios to Reason

There is evidence of new trends emerging in the market.

US bonds look ready to head lower relative to their foreign counterparts. Will another cycle of credit shock prevent this trend?

Although the SPX indicator remains bullish, the NASDAQ is now bearish for the first time since the end of November. This implies an environment of increased volatility with a lower percentage of stocks trading above their 50dma.

The spread between the SPX buy write and its underlying is currently bearish because it is rising. Moreover, the 10sma is beginning to flatten, so a break of recent resistance would be even more bearish.

The Yen is rising against the USD and that doesn't bode well for equities. Perhaps it will retest the recent highs before the BOJ acts again.

Treasuries are technically in a downtrend relative to gold, and that puts the dollar in jeopardy. Perhaps another round of credit crisis will bring money back to the ol' U.S. of A.

The market looks poised to break lower, but there isn't enough cause for alarm to run to the exits yet. Increasing volatility is certainly a bearish symptom, and considering the massive run up since the November lows, a move lower is quite reasonable. The numbers being released Friday are utterly meaningless, but the reaction will be critical.

On a side note, it's good to be back online with a working computer. Although the imbeciles at Office Depot raped my face and charged 100+ clams for an AC power adapter, I will have the last laugh; their awesome 14 day return policy is effectively a free rental. Now that I've bought another on Buy.com for 29.99, maybe I'll swallow the power chord and floss my intestinal tract before returning this P.O.S. adapter to the Office Despots.

Market Makeup

A rundown of various market themes for tomorrow's trade.

Despite the hefty haircut in the QQQQ's, my NASDAQ indicator is still bullish. Buy the dip is still in play until I see some O's, but I'm taking very small positions.

The BXM/SPX ratio is bearish as long as it is printing X's. Nevertheless, it is approaching resistance and a 10sma downtrend.

After mentioning HYG here, I rode today's wave up and I'm adding to it as the tape presents itself. JNK also has breakout potential.

Another bullish indicator is the rising summation index.

The first sign of potential inflation is here as the spread trend between the 30Y Treasury and Gold begins to loose momentum.

Today's action was a little hairy for a buy the dipper, and if there wasn't such a strong late day rally, I'd be pretty worried. Tuesday will be critical as further weakness will likely make my SPX indicator bearish. Smooth trading to all, and happy Hanukkah to my fellow tribesmen.

Rendering Ratios

One final chart post for the weekend.

My NASDAQ indicator keeps printing X's signaling lower volatility and more bullish stocks.

The intervention I was looking for here is underway. Don't fight the BOJ until you see another X printed.

Gold and precious metals like silver continue to put in nice uptrend work. This remains the best sector for any long bets.

More NASDAQ stocks are trading above their 50dma on lower volatility, another bullish sign.

The only thing holding back the inflation trade is the strength of long term Treasuries.

Nothing too crazy in this mix, but I like to keep track of EVERYTHING. Sometimes it feels like busy work, but you never know where future insight will lie. Next up, getting my X-mas wish list ready.

Internal Investigation

A few ratios to discern the state of the market.

My NASDAQ indicator printed a new X today despite today's fall. Lower volatility is bullish.

The BXM:SPX ratio is banging against the 10sma again, hopefully it will act as resistance and the spread will turn around (bullish).

The continuing fall in Treasury yields is quite discomforting. Either it is fear or a part of some fund strategy that I have yet to understand.

Some suggest that the VIX:VXV is signaling a sell, but I don't see that quite yet.

Although oil is falling in dollar terms, it has yet to make a new low in gold. I'm cautiously bullish on oil, but not with much confidence.

Mixed messages all around, but I'm still buying the dips. Risks are still very high, and the potential for government currency intervention makes prediction particularly difficult.

Just for the Record

According to my NASDAQ indicator, the market is stronger than the pre-election rally.

Buying dips in sectors breaking out of bases is the way to play.

At some point I'll make a rundown of sectors I think are hot, but gold miners are clearly the group to beat. A return to prices seen before Lehman's closed is possible before a resumption of the bear market. Emerging commodities markets and growing countries stand to benefit in the coming rally, all at the expense of the US dollar and Treasury prices. The market still exhibits high risk, but volatility is declining and there are an increasing number of bullish stocks. Trade what you see, trade well.

State Of The Market

A few market signs for the lost. The following precipitous graph is an example of the impact the financial crisis is having on the real economy.

The BDI indicates how much shippers get paid for carrying freight. Due to the unwillingness of banks to write letters of credit for merchandise, shipping is mired in a death spiral.

US Bonds continue to outperform US Equities.

The NASDAQ continues to hold on by the skin of its teeth, but with the risks so high, holding equities overnight is a game for people much braver than I.

Less NASDAQ stocks are above their 50dma, but if the index doesn't collapse tomorrow, we could see a short squeeze.

Nevertheless, the NAMO is a tad overbought, so I expect choppy trading for a day or two. Time to take photos, sculpt, and learn to play music.

The market is still volatile and thus provides great opportunities. On the other hand, my trading costs are starting to rise as I get whipsawed and suffer prolonged cognitive dissonance. I'm trading with small amounts, trying to find/keep a rhythm, but nothing seems quite clear after today.

P.S. Has anyone else in the blogosphere suffered ISP problems during very volatile market days?