Saturday, March 14, 2009

No, I don't think we've bottomed

in general stocks. Some pretty reliable indicators tell me there's excessive bullishness. Now, we could still rally for another day or two, maybe a week at most, but then I think we're going to take another plunge. Now, I know a lot of people are saying there's excessive bearishness, but that's not what I'm seeing. Two easy indicators to follow the money that I use are the equities put to call ratio ($CPCE) and the Chicago Board of Exchange total put to call ratio ($CPC). I also follow the fear gauge or Volatility Index ($VIX).

Below are some charts showing what I perceive to be too much bullishness to allow a solid bottom to form here. The first is a busy chart, as it has three plots on one chart using different colors. This 2 year chart shows the $VIX, the 5 day moving average of the $CPCE (daily plot too noisy) and S&P 500 ($SPX) since the bear market began:

Below is the 5 day moving average of the $CPCE (daily plot too noisy) versus the $SPX over the past 2 years:

The two charts above tell me we're closer to a top than a bottom! I don't think we'll make it through this next week without some downside pain getting started. Staying short KSS and AZO and short commercial real estate via a long position in SRS.

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