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Pastimes : The Philosophical Porch
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From: Rarebird9/14/2010 9:14:00 AM
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Transcendental Market Truths:

The Market:

The stock market rallied on the back of strength in the euro Monday in a final fling that should end this cyclical uptrend. Sentiment has reversed completely from what it was from last week's generally bearish ratios to overly-bullish. My $-Weighted Call-Put OEX ratio closed yesterday at 2.33. A close near the value of 2.0, which means that twice as many dollars are going into calls as opposed to puts, will often signal a top and a reversal within 2-3 trading days, which would target Wednesday or Thursday for a significant top.

EUR/USD:

Another key indicator is the euro itself. I have been anticipating that it would retest its broken support line and reverse to the downside. That happened yesterday.

Advance-Decline Line:

The advance-decline line moved higher on yesterday's rally and that suggests that the risk in shorting the market here is still substantial. For one thing, the Semiconductor SOX Index had a substantial bounce. It has, of course, been the weakest of indices. When the weakest index becomes the strongest, even for a day, it presents a clear and present danger for those who are looking to sell the market short. SOX leads the rest of the market, so it was obvious during yesterday's rally that the market has not finished making a top.
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