This market has been notoriously difficult for calling bottoms, but I think with the SPX at 687 as I type this, we are very close to an intermediate-term bottom.
you remark that low VIX plus large put buying resolves in a bearish fashion. Right now we have high VIX plus relatively low put buying (although a bit more put buying last few days, but ISE and CBOE put buying are not at extremes). In other words, a reverse of what it was in early 2008. Any significance to that? Still not enough pessimism?
Consider that "a bottom" is not the same as "the bottom" -- though with a little time any bottom can start to increase in strength and importance.
Lance,
Regarding the absence of extremes, I too have been struck how reluctant some of my sentiment indicators have been to provide extreme readings. I think this may be a case of having purchased our pessimism on the installment plan, which is consistent with a "stealth bottom" rather than a dramatic capitulation.
Thanks for your insights Bill-- I can think of a few reasons why this might be an intermediate term bottom, but if you could find the time to list a few as you see them, I'd love to read it..... ---Tom
Anon, I guess you mean 'intermediate'. The minute we start hearing 'it's different this time' tends to be exactly when it turns, @ tops or bottoms. There's an exhaustion, a disinterest, at the moment, and as Bill says no small part of it is that the vix is not going higher after -what?- 12 of 13 days down?.... One man's opinion.
Intermediate bottom is pretty likely, but the bottom is unlikely. I prefer to use the 81-82 bear market as the template -- a long grueling sell-off over time. Not a capitulation either.
It is indeed different this time around, but I'll take that bet with a share of GE. Perhaps it will buy one of us breakfast...
Tom,
Regarding the inputs into my decision-making process, #1 is a proprietary indicator I keep that combines volatility, put to call data, market breadth and volume. This indicator has been bearish for three months running and just became (slightly) bullish today. I would normally wait for this indicator to become more bullish, but I do think it is significant that it is even slightly bullish.
Among the other factors were the timing of the employment report tomorrow BMO and the AAII data. I do see some SPX support at 680, but I'm not sure how strong it is.
So far this call is looking marginal, but at least it drew quite a few comments.
Thanks Bill-- I figured as much about your proprietary indicator: thanks for sharing the info. Well the lower it goes here, the more comfortable I'm feeling at the thought of dusting off some dry powder.. nothing too rash mind you, just a leg. Best of luck--T
GM stock decreased from over $6/share in October to its current price of less than $1.90/share. The stock markets concern about GM should diminish soon since President Obama mentioned during the October 2008 Presidential debates how the U.S. domestic automobile manufacturers would be competitive through the sale of alternative energy vehicles.
I am looking at financials today, double top in SKF??? Volume seems a bit lite on this big downside move. If we do not see significant volume by the close, I would be feeling bullish about the XLF and the SPX. Financials have to lead the way out.
Some bullish notes today for banks. Bank Deposits are growing rapidly, their cost to lend should be dropping. This lends to some hope for financial growth. But who knows, everything seems to point to mass nationalization.
I did think yesterday or today would be that intermediate bottom, but the bulls have no conviction and the bears see no reason to cover yet.
Regarding my rationale, in addition to my indicator(s), I thought that buyers would return today no matter what the outcome of the payroll report was. Clearly I overestimated their eagerness.
We may still be in the process of forming an intermediate bottom, but it certainly doesn't look/feel like it today (so far).
The SPX closed up 0.1% and the VIX decreased 1.7% today, despite the 651000 increase in the number of unemployed people. 12.4 million Americans are unemployed and the unemployment rate increased to 8.1%, the highest unemployment rate since 1983. Positive developments are expected since President Obama stated that "A cycle of job losses is simply not a future that I will accept". A multi-month low was formed in the SPX index in March 2008 before it was taken out in July 2008. A spike did not occur in the Vix indicator yet and a new low in the SPX index may occur later this month.
Yeah sure. A bottom. Please.
ReplyDeleteOn this post
ReplyDeletehttp://vixandmore.blogspot.com/2008/02/divergence-between-put-to-call-and.html
you remark that low VIX plus large put buying resolves in a bearish fashion. Right now we have high VIX plus relatively low put buying (although a bit more put buying last few days, but ISE and CBOE put buying are not at extremes). In other words, a reverse of what it was in early 2008. Any significance to that? Still not enough pessimism?
Anon,
ReplyDeleteConsider that "a bottom" is not the same as "the bottom" -- though with a little time any bottom can start to increase in strength and importance.
Lance,
Regarding the absence of extremes, I too have been struck how reluctant some of my sentiment indicators have been to provide extreme readings. I think this may be a case of having purchased our pessimism on the installment plan, which is consistent with a "stealth bottom" rather than a dramatic capitulation.
Cheers,
-Bill
Thanks for your insights Bill-- I can think of a few reasons why this might be an intermediate term bottom, but if you could find the time to list a few as you see them, I'd love to read it..... ---Tom
ReplyDeleteI'm willing to bet you one share of GE that this is no immediate or final bottom. Yes, this time it is different.
ReplyDeleteAnon, I guess you mean 'intermediate'. The minute we start hearing 'it's different this time' tends to be exactly when it turns, @ tops or bottoms. There's an exhaustion, a disinterest, at the moment, and as Bill says no small part of it is that the vix is not going higher after -what?- 12 of 13 days down?.... One man's opinion.
ReplyDeleteIntermediate bottom is pretty likely, but the bottom is unlikely. I prefer to use the 81-82 bear market as the template -- a long grueling sell-off over time. Not a capitulation either.
ReplyDeleteAnon,
ReplyDeleteIt is indeed different this time around, but I'll take that bet with a share of GE. Perhaps it will buy one of us breakfast...
Tom,
Regarding the inputs into my decision-making process, #1 is a proprietary indicator I keep that combines volatility, put to call data, market breadth and volume. This indicator has been bearish for three months running and just became (slightly) bullish today. I would normally wait for this indicator to become more bullish, but I do think it is significant that it is even slightly bullish.
Among the other factors were the timing of the employment report tomorrow BMO and the AAII data. I do see some SPX support at 680, but I'm not sure how strong it is.
So far this call is looking marginal, but at least it drew quite a few comments.
Cheers,
-Bill
Thanks Bill-- I figured as much about your proprietary indicator: thanks for sharing the info.
ReplyDeleteWell the lower it goes here, the more comfortable I'm feeling at the thought of dusting off some dry powder.. nothing too rash mind you, just a leg. Best of luck--T
Bill,
ReplyDeleteLove your blog andh ave been reading every post since the very first.
I think this downleg has to end on heavy volume and a complete pierce of the lower Bollinger Band (now around 675).
I think today is the bottom (for the next week at least), but a bit lower in the 660's. 1 hour to find out!
A trader friend passed this on a few days ago...thought some people might enjoy it.
ReplyDeletehttp://isthisthebottom.com/
"market can remain irrational longer than you can remain solvent"
ReplyDeletei dont see "a" bottom yet
GM stock decreased from over $6/share in October to its current price of less than $1.90/share. The stock markets concern about GM should diminish soon since President Obama mentioned during the October 2008 Presidential debates how the U.S. domestic automobile manufacturers would be competitive through the sale of alternative energy vehicles.
ReplyDeleteThe old saying goes, "catch a falling knife".
ReplyDeleteThis is more like standing at the bottom of a waterfall trying to get a drink.
Bill, I do not know what more you can say, but I always look forward to hearing your thoughts.
So, still thinking this is an intermediate term bottom? If so, what metrics are having you lean that way?
ReplyDeleteI am looking at financials today, double top in SKF??? Volume seems a bit lite on this big downside move. If we do not see significant volume by the close, I would be feeling bullish about the XLF and the SPX. Financials have to lead the way out.
ReplyDeleteSome bullish notes today for banks. Bank Deposits are growing rapidly, their cost to lend should be dropping. This lends to some hope for financial growth. But who knows, everything seems to point to mass nationalization.
I did think yesterday or today would be that intermediate bottom, but the bulls have no conviction and the bears see no reason to cover yet.
ReplyDeleteRegarding my rationale, in addition to my indicator(s), I thought that buyers would return today no matter what the outcome of the payroll report was. Clearly I overestimated their eagerness.
We may still be in the process of forming an intermediate bottom, but it certainly doesn't look/feel like it today (so far).
-Bill
The SPX closed up 0.1% and the VIX decreased 1.7% today, despite the 651000 increase in the number of unemployed people. 12.4 million Americans are unemployed and the unemployment rate increased to 8.1%, the highest unemployment rate since 1983. Positive developments are expected since President Obama stated that "A cycle of job losses is simply not a future that I will accept". A multi-month low was formed in the SPX index in March 2008 before it was taken out in July 2008. A spike did not occur in the Vix indicator yet and a new low in the SPX index may occur later this month.
ReplyDelete