Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Paint The Table -- Ignore unavailable to you. Want to Upgrade?

To: Oral Roberts who wrote (13414)	2/6/2002 6:14:08 PM
From: Jorj X Mckie	Read Replies (1) \| Respond to of 23786

It hits on that "debt" thing. I think that ultimately, until the credit bubble is deflated, we cannot see a real recovery.

To: Oral Roberts who wrote (13414)	2/6/2002 6:21:58 PM
From: MulhollandDrive	Respond to of 23786

Be sure to click on the link to view the charts. worldlyinvestor.com While our main sentiment indicators – the equity-only put-call ratios – remain noncommittal, some of the other technical measures that we respect are sending out a much more bearish message. First and foremost is price action. The graph in Figure 1 summarizes the situation. The market recently broke down below support at the 570 level of the S&P 100 ($OEX). However, within a couple of days, it had rallied back above that level and it appeared that another false breakdown had occurred (point "B" on the graph). That was short-lived, though, and now prices are headed lower once again. By itself, that's only modestly interesting. But now look at point "A" on the graph. A very similar thing happened there: last August $OEX broke down below the then-important 600 support level, only to rally back above it a couple of days later. Then an all-out decline followed. The similarity between the two patterns is certainly something to be taken into account, although it should be noted that the market rarely has two exactly similar patterns in a short time frame. Taking this all into account, we'd have to rate price action as bearish. Fig 2 Then there is option implied volatility. It has increased quite a bit recently, as the market once again has fallen. However, it still has not clearly broken out to the upside. When implied volatility is rising, that's bearish for the market. The most popular way to measure volatility is to use the CBOE's Volatility Index ($VIX) (Figure 2). It has spiked up above the 25 level a couple of times recently, but hasn't really gotten up a full head of steam on the upside. We also measure volatility by looking at the composite implied volatility of the options on the 100 stocks that comprise the $OEX Index. The long-term downtrend in implied volatility is still intact by that measure, though, so it's not as bearish as $VIX appears to be. Nevertheless, in both cases volatility is above its recent lows and if the rising trends continue, that can't be a good sign for the overall market. So, caution is called for, and when one spots heavy put volume on individual stocks that are also breaking down below support, he can buy puts or sell the stock short. Recent instances of this type of bearish action include General Electric (GE), Lehman Brothers (LEH), Synopses (SNPS), Viacom (VIA/B), and Verisign (VRSN). Lawrence G. McMillan is author of the bestselling book Options As A Strategic Investment, available here. He is also author of McMillan on Options, available here. He is President of McMillan Analysis Corp., trades for his account and others, and he publishes several market newsletters, including The Option Strategist. To receive McMillan's comments weekly click here. While you're there, visit the other areas of our site. You'll find some interesting items.<