Monday Oct 3, 2011
Clearly we were wrong to hang around past the last up move on the hourly chart his past week. Markets are in melt down mode. As it is still early October we should expect much lower prices by month end.
Weekly NYSE Bullish Percentage
The NYSE is already in territory last seen in early 2009 during the final leg of that meltdown.
The gap down at far right looks a lot like the gap going into October 208.
MYSE Summation Index
The NYSI has rolled over and the MACD measure is nowhere near its previous bottom.
Weekly Net New Highs New Lows
The indicator is well into Fall 2008 territory but we are at much higher valuations. My conclusion is that fear is as high now as then. It is also interesting to note that only a couple of weeks in 2008 exceeded the extremes we have already experienced! And again this is at DOW 10,50 not 6.666.
PTEN Still a great indicator
Patterson PTEN is in red black, the solid black line is the price of oil. I sincerely regret not jumping up and down to insist that everyone short PTEN at 33, I predicted that as a top and it is proving quite the case. PTEN is leading oil down as well as stocks. The low in 2008 was 7.5, it appears we are headed there again.
So indicators suggest the market internals have much further to fall before a meaningful bottom occurs. Suggesting how low that might be seems futile, the better idea is that stocks like PTEN could fall another 50% this month. I posted an article from the WSJ today on the student blog that US banks hold $332 Trillion of derivatives. No one has any idea what the counter party risk, ie, the other party to the Credit Default Swap or whatever might fail. My point being that risk is very very high. All the things we have talked about this past year, emerging markets being too high and falling, China in trouble, the US Dollar would eventually rise, US internals peaking in February, high fliers like NFLX likely to fall, have all come true. Again pardon our not being more bearish and insisting on shorts.
Still there will be a bottom and it will come amidst terrible news.
VIX TLT
VIX is nowhere near topped out on the MACD indicator at bottom. TLT a fund of long dated government bonds appears to want to go higher as well.
Stock positions should be slimmed to the point that you can wait out what you have with ample funds to add on what will surely be a wildly oversold point that lies ahead. Gold mining shares will likely bottom and start advancing before we get a stock market bottom. GDX and GDXJ show now signs of that yet but we will be alert for that event.
Again as we have said all year, the bad news have finally sunk in and markets are down.
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