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Pastimes : The Philosophical Porch
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From: Rarebird4/9/2010 8:43:22 AM
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Transcendental Market Truths:

The Market:

Yesterday, breadth was not impressive, nor was volume. In fact, volume was much stronger the day before yesterday when the market was going down than it was yesterday, which is a sign that the bulls are still fairly nervous about holding stocks at such high levels of overvaluation. Not only that, but the ARMS Index (TRIN) has seldom been this overbought in history. Yesterday's's value of 0.52 shows that the market just can't put in a decent correction - bottom feeders are buying the dips at any time the market drops to a prior low. This may be short term bullish, but longer term very bearish, just as the option sentiment is in the same condition. A market where the call buyers are rewarded by fading the declines is setting up for a very big spill in the future. My OEX Dollar-Weighted Call-Put Ratio ended the day at 2.33, indicating that slightly more than two dollars were being bet on the market continuing to rally for each dollar being bought for protection against a downside move. This is the kind of sentiment I saw at the 2000 high just preceding a slide of 50% in the SPX.

What the market is doing here is so similar to what it did at the January high this year that I think that the market will see a similar correction.

I could go into more short term detail here. However, my prime interest entering 2010 was to track the mid-May and late August peaks and profit handsomely on the short side (especially from the late August Top).
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