Bonds And Fear

By: Stock Barometer | Tue, Apr 29, 2014
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4/29/2014 5:49:27 AM

Good morning Traders,

As a heads up, we're seeing some extremes out there - which means we're at a point where the markets can be vulnerable to a catalyst. And wouldn't you know we have a 2 day Fed meeting starting today!

Our first extreme looks at options action. Whenever this indicator reaches a peak, we get a little cautious on the markets.

Equity to Index Option Volume Ratio Chart

The basis of our research and 14 years of advice is that the key to reading the market is combining price action with market internals and market sentiment. The best and simplest indicator for fear, complacency and greed is the equity put call ratio. It has been building in fear as prices remain high. That's bullish from a contrarian point of view.

Equity Put/Call Ratio Chart

And finally, the barometer algorithm - which puts it all together:

Daily Stock Barometer Primary System Chart

We are seeing a divergence between price action and 'energy'. One is right and we will see which one over the next couple days. We also have some key dates coming in. 4/25 was a 35 day trading cycle bottom. And our last key reversal date was 4/26 and next one is 5/6.

That suggests to me that we'll see a bounce into 5/6 to work off that building fear at which points I'd get more bearish. Though that's going against our 2014 forecast, which would suggest a sharp sell off to 5/6 - which would set up a rally into our 7/16 call for a top in the market. For more info, refer to our NYSE Timing Charts in our research data base (included with your subscription).

Regards,

 


 

Stock Barometer

Author: Stock Barometer

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