Wednesday, January 23, 2008


You certainly cannot accuse the markets of being boring right now as volatility continues the dominant theme.

Today was not exactly what we had anticipated as we thought the market would rally right from the word go and not look back. The FTSE overnight took care of that scenario for us as the market got hammered early again.

The pattern we got today though is actually more bullish than had we gotten what I had anticipated, plus it afforded us yet another opportunity to increase our equity exposure.

A double back to back reversal pattern.
Not a very common pattern, but when it comes around it is exceedingly bullish.

I also like the put/call ratio remaining bearish during the course of the entire day.

It shows that most investors do not trust the reversal days and they continue to wait for the other shoe to drop. This is very bullish and a trend in this direction will support the market at higher prices.

Put/Call model generates a buy signal with the higher high followed by the turning down of the indicator.

We will have to watch this indicator very closely as the market rallies to get a feel for the sentiment of the market.

The rally after the August 2007 low was met with heavy call buying and sent up a red flag about the markets ability to hold onto the gains it managed to put together through October 2007.

We do not want to see a repeat of this action this time around, otherwise we may just be looking at a counter trend rally in a bear market. Obviously there will be more to judging the rally than just one indicator, but this is an important one.

No comments:

Trend Analysis LLC Headline Animator