Thursday, February 26, 2009
Short-term trader plunge alert! The next week is NOT going to be pretty for the bulls. For my bearish brethren, the cash register is going to start ringing. There is too much complacency and too little fear as we re-test the panic fall lows, thus, we will smash below them with a vengeance.
The $VIX and $CPC (put to call ratio) tell the story in the charts. These charts that follow are busy, but the basic issue is simple: when lows in a bear market are re-tested, fear (i.e. $VIX) and the short ratio (i.e. $CPC or $CPCE) should both increase in order to cement a lasting bottom so that an intermediate advance can occur. This is not what's happening, so we'll keep dropping from here. Period.
Here's a $VIX chart from recent history (2 year daily chart):
Here's the last cyclical bear market within this secular bear (2000-2003 bear):
Here's some summation index action ($NYSI) relative to the S&P 500:
I am also very concerned (or, as someone who is short, should I say excited?) about the put to call ratio, a measure of sentiment related to what people are actually doing with their money (i.e. action, not talk):
Bottom line: I remain confidently short. Bulls beware, the panic wash-out ain't even started yet! A 10% drop/rinse from here is not an unreasonable proposition and should finally get the bulls to shit their pants so we can have a decent rally into the spring. Think 1937-1938 (apologies to Institutional Advisors for the chart theft):
$$$$ drop from the helicopters straight ahead for the bears...