pay attention or pay the offer» Sentiment

Internal Indicators

chris — Mon, 22 Dec 2008 22:12:27 +0000

Here’s a couple of U.S. stock market indicators that appear to be in overbought territory. The ISEE call/put ratio is at 129 on a 10-day basis, a level it hasn’t seen since last may. The Tricks index is moving off of the upper Bollinger Band. There is no divergence in the Tricks, yet both indicators are saying that the upside is limited here and downside risk is increasing.

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Shallows & Miseries – Low Tide in the Affairs of Men

chris — Sun, 26 Oct 2008 18:08:49 +0000

“There is a tide in the affairs of men.
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.”

Shake-speare: Julius Caesar Act 4, Sc. 3.

There’s been some ‘buzz’ in the media and on the internet about the ‘lunar calendar,’ some of it more helpful, some of it less. There’s also quite a bit of new traffic coming to the site, (Hello, Poland!) so it’s a great time to specifically outline what is and is not occurring in the market right now.

One person’s blog linking to this site has an entry titled, “Another Crash Caller: Chris Carolan.” Say what? I am not calling for a crash. The crash is over. It’s in the rear view mirror. Where We Are is at the point of maximum panic right now. In fact, that point most likely passed within the last few hours, if we take the average of the low points of the previous panics and crashes of 1929, 1987 and 1997 as our guide. This is low tide in the affairs of men right now!

The VIX index is as pure a measure of human trader’s ‘fear’ level as any I know. The VIX reached a new high for this panic on October 24 of 89.58. It’s possible early Monday sees a higher level, but after that VIX should fall indicating the point of maximum fear precisely fell on the dates calculated by my Autumn Panics research.

I am not telling people to get long the market here. My June 2008 report outlines the path I believe the bear market will follow in coming years, and there’s plenty more trouble ahead. If you haven’t read that report, it is still very timely. Passing the point of maximum panic right now does not insure that the cascading nature of selling will end now. Lower prices beget margin selling which beget lower prices etc. It’s possible that there is still more of that forced selling that must occur regardless of the phase of the moon.

Nonetheless, I am saying that the level of fear, and widespread fear is the very definition of panic, will begin to abate next week. The highest VIX reading of the year should be right now. Friday morning’s 89.53 high is likely peak reading for the Panic of 2008.

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I’m receiving a lot of questions in my mailbox about the Solunar Model. I’ve discussed how it’s made in old issues (now unavailable) of Calendar Research Reports, but I’m not going to detail it here. Primarily because I don’t want to highlight the Solunar Model as some type of ‘answer’ – it’s not. The model is doing very well right now specifically because the markets are so emotional. The model shows the emotional track of the market. Because one of the component years for this year’s model is the Asian panic year of 1997, there is more than the usual amount of ‘replay’ to history right now. Cycle students will note the 11-year span from the Asian Panic of 1997 to the panic of 2008 is what the Greeks called the hendekas. The Spiral Calendar text book shows how the October mini crash of 1989 was an 11-year replay of the ‘October Massacre’ of 1978.

There’s also been questions about the November Spiral Calendar turn date mentioned in the June report. It’s really best to not attempt to figure out those dates before they arrive. It’s preferable to rely on one’s best analysis of the market at any given moment and then when that time comes, measure the emotional state of the market to see if that date has a relevent effect.

October Overview

chris — Tue, 14 Oct 2008 23:45:00 +0000

Where does the October 10 low fit in the bigger picture? Was this an important low? What about the ‘dark day’s calculation outlined in “Autumn Panics, A Calendar Phenomenon?”

The October 10 low is clearly important. The put/call numbers at the bottom were extreme as was just about every measure of market emotion. From a timing standpoint, this low is F15 on the Spiral Calendar back from the expected final low in 2010. So here is a logical place for the market to pause. Will there be a test of this low? I think we’ll definitely see some time of renewed selling. I’m showing a Solunar Model chart here for the first time on the blog. Former Calendar Research subscribers will recognize this analysis. The Solunar Model is a seasonal model, constructed by averaging past years’ performances, like any seasonal model. The difference is that only those years with a similar lunar calendar to this year are used in the calculation. The chart shows how the model has correctly called the general shape of the recent months’ trading pattern. The model’s low point for the year is October 26, coincident with the Autum Panics ‘dark days’ calculation.

On balance, I think we see more selling, but the most severe selling is complete for the foreseeable future. It’s unlikely that October 10’s lows will be taken out this month. A rally into early November could set up the Spiral Calendar date shown in the June report as a high. But it’s really too early to speculate even a few weeks out given the extreme psychotic nature of recent trading. Anything can surely happen.

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Some Internals

chris — Fri, 03 Oct 2008 15:35:11 +0000

Here’s a look at a few internal measures of the U.S. stock market’s health. The 10-day new highs minus new lows is diverging. This is a postiive. The 2 hour put/call ratio shows another spike up – the chart is through yesterday’s close. However, overall option volume is far below the mid September spike. I read these charts as bullish here as well. The sellers seem close to exhausted from my perspective. The danger is that the stock market internals may be useless here, as the real driver now is the disintegration of the credit markets. I’ll post more on that this weekend, but there are plenty of scary stories coming from people who follow credit closely. These folks are genuinely scared about what they are witnessing unfold.

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Accumulating Evidence

chris — Tue, 30 Sep 2008 15:42:22 +0000

Evidence is accumulating that a stock market low is in place. Yesterday’s presentation of the Sprial Calendar turning point set the stage for a potential emotional market turn. Prices weren’t at new lows, so I was skeptical of the SC’s value here, but once the September 18 low was taken out, this turn was ‘in play.’ For those not familiar with the Spiral Calendar, the theory is that emotional market turns are linked to previous emotional market turns by Spiral Calendar time units. The power of the Spiral Calendar was on display earlier this year with its spectacular call of the oil bubble top here. But remember, the size of the expected turn is proportional to the time units involved, so these are relatively short Spiral Calendar time frames – therefore expect a dramatic and emotional low, but not one that will mark the end of this bear market. This is an intermediate low that will hold for months at best.

Yesterday’ VIX extremes are the type of emotional readings seen at important bottoms. The combination of the high VIX numbers and the clustered Spiral Calendar dates are convincing evidence of a bottom here.

The picture from my technical indicators confirms this view as well for the short-term. The 60 and 135 minute eMini chart both have modified DMX divergences in place. It’s no time to be bearish on U.S. stocks!

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Hold the Fort

chris — Thu, 18 Sep 2008 12:25:45 +0000

It appears that another attempt by stocks to hold these levels and form a low will occur today. The enormous volumes suggest that a climax of sorts is underway. I’m showing the CBOE total volume chart again today, as that volume has continued to climb.

The 60 and 135 minute charts have enough divergences to support a rally attempt as well. Any turnaround has about 1230 as the maximum upside limit. The Tricks Index shown yesterday argues against a ‘final’ low here, so I’m more inclined to look for a bounce now and then a retest a little later. Heck, it’s only mid September with all of October still in front of us.

I hope people saw my gold comments yesterday morning published when the metal basis the December future was at 816. It’s at 883 now! In past panics, U.S. treasury securities have always been the go-to safe haven. That baton seems to have passed to gold. I think this will be seen as a watershed event when viewed with historical perspective in the future.

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The Surge

chris — Wed, 17 Sep 2008 03:43:40 +0000

No, not that surge. The first chart show the tremendous surge in put/call option volume today. That surge is commensurate with a market extreme. The second chart shows the put/call ratio which is high enough to mark a low, though I’d prefer a more extreme reading. However, here I think the volume is more important than the ratio itself.

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Yesterdays update, Watch Rates, said to look for a reversal in interest rates as the sign of a stock market bottom. Rate markets across the board reversed dramatically. The chart below shows the eurodollar futures which managed to form a bearish range-bust reversal on the weekly chart – and it’s only Tuesday!

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The 135 minute eMini chart shows the tick cycle-trap divergence confirmed on today’s last bar. I’m skeptical as to how much actual upside can be acheived in this financial climate here. But it’s safe to say a bottom of at least a short duration has been reached. Perhaps some type of sideways bear flag will form in the 1180-1240 range as stocks work off their indigestion from the turmoil of recent weeks.

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Where’s the Fear?

chris — Tue, 16 Sep 2008 01:08:01 +0000

The 10-day chart of CBOE put/call ratios shows that there is yet to be the extreme fear common at important market lows. In fact there are five lows in the past 15 months with higher put/call numbers than the current reading.

: 10-day CBOE put/call ratio 15 Sep ‘08

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It’s time to show the Tricks Index. I look for two events to signal a low on the index; first the index should get into the vicinity of the lower bollinger band and then the index should make a higher low while price makes a lower low. Right now, the index isn’t anywhere near the lower band. Notice how volatility in the index has brought the bands to their widest span in recent months. It looks like plenty of room on the downside from here!

: Tricks Index 15 Sep ‘08

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Internals & Sentiment

chris — Wed, 20 Aug 2008 21:50:32 +0000

The picture presented by market internals and sentiment indicators is mixed. The High Low Logic Index reiterated it’s bullish stance with another buy indication yesterday. The Tricks Index suggests prices are headed lower. The 2-hour Put/Call ratio, an extremely short-term measure, plunged today, a reading that I believe has bearish implications looking forward.

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Put/Calls & Sentiment Deterioration.

chris — Thu, 31 Jul 2008 21:09:13 +0000

The 10-day put/call chart never got to the extremes of bearish sentiment at the mid July lows that it had seen at the March ‘08 or July ‘07 lows. Now, the ratio has dropped quickly to levels that almost match the top of May ‘08, all while stocks really haven’t made much upside progress. This sentiment picture is a recipe for a steep decline now.

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