Coving,
Generally, I like the tone of the market...from a short's perspective. Here's another little indicator I like to use before getting defensive: the Prudent Bear Fund. The symbol is BEARX. This has had a nice little uptick recently, and if you are able to plot its historical NAV's, you'll note that every single time it closed above the 21 week moving average, it had a tendency to spike up a tad. This movement was inversely correlated with the broad markets, meaning that as BEARX spiked, the market weakened considerably. I'm showing that as of yesterday, the fund closed above its 21 week moving average for the first time since August 14, 1998, the signal that got you on the right side of the market as it collapsed in October. BEARX spiked from $6.15 NAV to a high of $9.51, and the market suffered correspondingly.
With these yields on the 30-year treasuries in uncomfortable territory, there's that increasing potential for market P/E's to compress further. In any case, prudence would appear to dictate a more defensive stance in this current environment.
...Now that I think about it, I wonder how this chart would look like with a Fibonacci-based market cycle overlayed on the charts. Think I'll do that when I get back home...
--Rainier |
