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.

Historical Indeed

A new guy moves to the White House every eight years. I think the real news is here; today was the biggest Dow drop on inauguration in history.

Volatility is screaming upwards, and clearly fewer stocks are in bullish formations. The tape still warrants selling the rips, and I suspect we're in for bigger dips.

Buy write strategies continue to outperform the underlying index, indicating bearish sentiment as the market seeks to hedge long positions.

The momentary bounce in the NAMO was snuffed out by torrential selling. Unless you can move quickly, defense wins this game, so don't jump on the equity train.

The scariest chart I follow is the NASI. A run to the LEH collapse lows would be a doozy. Like all of the charts in this post, I have no confidence in any bounce until I see an X.

Amid the increasing volatility, fewer stocks are trading above the 50dma, so investors will probably continue to sell their increasingly worthless stocks.

The collapse of RBS and BCS should be making headlines every 2 minutes, but all eyes and ears are tuned to the $170 million party in D.C. A massive liquidation could be in the works as Britain finds itself trapped between a collapsing Pound and hemorrhaging banks. Cash remains king for all but the most nimble traders and disciplined short sellers. Breath deep.

Cash Is King

Market conditions continue to deteriorate as panic spreads around the globe.

My SPX indicator made a new O, signaling increased volatility and fewer stocks in bullish formations. Buyers should step to the sidelines and wait till the current rush to safety subsides.

The buy write index continues to outperform the underlying SPX, reinforcing my bearish sentiments. A break of the upper Bollinger looks to be in the works, so stay defensive.

Equities have entered a new downtrend relative to bonds, so despite talk of a Treasury bubble, there is no appetite for risk.

The Dow Jones World Index is now below the 10sma, and since the global equity markets move in harmony, buyers should beware the primary global trend.

Fewer stocks are trading above their 50dma amidst rising volatility. Any trading on the long side is best left to billion dollar funds that can provide the liquidity being sought.

Another wave of fear is sweeping the markets, and there is no telling when it will stop. The possibility of another massive bank failure looms; Citigroup can't catch a bid despite a headline deal with Morgan Stanley. SRS and FAZ are the best vehicles for making money intraday, but the incredible volatility requires strict discipline and mental stamina.

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.