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Some indicators worth watching. Keep in mind that

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ReturntoSender Member Level  Sunday, 07/23/06 07:47:52 PM
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Some indicators worth watching. Keep in mind that these are indicators that must be used within the context of how the market is trending. Right now we have a looming economic slowdown ahead. Defensive sector stocks are beginning to pick up leadership positions while technology stocks "Growth Stocks" have fallen out of favor and are selling off on high volume. While the SMH, QQQQ, NDX and Nasdaq are all oversold in a big way any bounce from here (it is likely that we bounce) will be met by more selling and a lower bottom later this summer. Perhaps we will get an October bottom like we did in 1998 and 2002 which would fit perfectly we Presidential Cycles.

Short Term to Intermediate Indicators.

It's best to be cover shorts and enter long positions on cross overs of green lines. Best to go short on cross overs of the red lines and or exit long positions.

The first set of charts for market timing the SMH are based on using the NASDAQ New Highs and similar indexes are shown here. To go long: First wait for the NASDAQ New Highs to set a new low and reverse itself from an approach of the lower Bollinger Band. To go short: Wait for the NASDAQ new highs and other similar new high indices to set a new high print at, near, or above the upper Bollinger Band. I am also now using the NASDAQ McClellan Oscillator (Ratio Adjusted) ($NAMO) to confirm the above - Overbought above 25 - Oversold below -25. These charts do not fully update until after market close.





Short Term Indicators vs. the SMH; any index can be used - The first set of short term indicators I use are based on the put to call ratio. To go long it is best to wait for the put to call ratio to close over 1.0. On the chart below the put to call ratio now updates intraday but it is not always accurate! Intraday reading of the put to call ratio can be found here updated every half hour after the open:

http://www.cboe.com/data/IntraDayVol.aspx

The more days in a row the put to call ratio prints over 1.0 this the more likely the bottom will be a strong one. The link above shows intraday readings of the P/C ratio.

Also closes on the put to call ratio below 0.50 and sometimes a bit above are indicative of a short term top. Watch the simple moving averages as well because periods of too much buying of puts or calls will almost certainly bring about market bottoms and tops respectively. On the CPC/VIX ratio; this is largely a longer term indicator where investors are likely to make more money on the long side once the short-term 21 day sma has crossed above the 200 day sma. The reverse is true as well. An investor will likely make more money on the short side when the 21 day sma crosses below the 200 day sma:





Next I use the VIX, VXO and VXN (Fear Indices) because they can help to refine decision making on tops and bottoms upon reverses from upper or lower Bollinger Bands especially when the index stretches more than 10% above or below its 10 day simple moving average. When a volatility index stretches more than 10% above or below its 10 day sma it will generally reverse direction as will the market in general in the opposite direction.







Also TRIN and TRINQ readings on the 5 and 10 day simple moving averages over 1.5 are bullish while readings below 0.85 are bearish. These readings don't happen often especially with the 10 day sma. They are also early indicators so the market can continue higher or lower for a while but they are reliable for indicating market turns that are about to take place.












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