We continue to see the anticipation for a relief rally build as the market continues to slide further into this Bear Market.  This is being played out in sentiment numbers as well as my favorite [for now] ratio: put/call.  It shouldn’t come as a major surprise there is a disconnect, the market “looks” quite oversold but in reality we aren’t as nearly as oversold as you might think.  Do not be mistaken we are oversold, but oversold conditions can deepen and last a very long time.  The battle continues in the stock market and its actions are speaking louder than words.

Sentiment indicators are pointing at near record levels of bearishness.  I point out a phrase my mother used to say over and over:  “actions speak louder than words.”  Therefore, although we have a significant bearish indication from sentiment readings are those who are responding acting bearishly in the market?  This is where my lovely equity put/call ratio kicks into gear.  Yesterday, the S&P500 closed at a multi-year closing low along with the NASDAQ composite index.  Yet, taking a look at the equity put/call ratio we see that it FELL to a .58 reading.  Option traders are desperately buying equity calls to “catach” a bounce.  This ratio also indicates to me that we have yet to see the bottom in the market as we have yet to see FEAR and PANIC strike at our lows.

Big tech stocks are rolling over once again, notably GOOG and AAPL look terrible.  If these breakdown further it will spell trouble for the NASDAQ.

Cash continues to be king, although the rate at which the Treasury is printing US Dollars Cash may lose its color.

Market Speculator

I am reading Ron Paul’s Revolution book, it is well worth the few pennies that you pay for it.  In fact, its worth a heck of a lot more than what you pay for it.  Many people fail to realize how powerful the constitution is and how our elected officials blatenly ignore it.  Go out and get the book!

I will be posting in the coming few days a spoof on predictions, should be fun.  At the moment I am formulating my thoughts on the market and how we’ll roll.

Wednesday’s action was surprising to me, I did not think volume would come in strong on either the upside nor downside.  Tuesday and Wednesday were extremely positive for the market albeit with below average volume.  We saw in 2006 and 2007 low volume rallies push into new highs, no reason this market can not rise on lighter volume.  In the long rung it will mean better short setups!  At any rate, the market is poised to move higher with nice accumulation after Monday’s distribution day.

I hope everyone had an enjoyable Holiday season.

All the best to your and yours in the new year.

MS

There is not one single silver lining to this market.  It is clear the path of least resistance is down and will remain so for the foreseable future.  Too many are looking for the market to bottom and rally higher.   The holiday wedging rally (rally on ligher and lighter volume) was the sign that the market was simply bouncing due to oversold conditions.  We have not seen the bottom and may not see one for quite some time.  Even though this may appear bleak what it will do is remove the excess from the system.  We have had too easy of a time gain access to credit and over leveraging oursevles.  This is coming undone and why we are seeing such dramatic moves in the market.  Look for more downside and the deleveraging process to continue.

The best thing for my trading style is to simply sit on the sidelines with cash and wait for an opportunity to get long.  Now isn’t the time, but at some point there will be a time.  For now, I am staying patient.

Best

MS

Stocks were able to sustain gains throughout the day as the market was able to close on its highs.  Volume was lower on the day as many on Wall Street simply stayed away.  Wednesday’s gains should carry through to Friday as the quasi trading day will be a lighter volume day.  No one will be in the office to be putting any cash to work.  I wouldn’t take much away from Friday’s action, but the rise on lower volume this week has been a tell that its not real buying (accumulation).  We’ll right this ship, it will take a long time but we’ll get there.

Happy Thanksgiving!

MS