AI
Wednesday, June 22, 2005 7:58:47 PM
After The Bell: The Subtle Shift 6/22/2005
Looking through 20 of my daily indicators, everything looked pretty much the same. Bears and Bulls spent another day at a standstill. I guess I didn’t really miss anything going in and out of meetings all day. None of my stop or limit orders got filled. It appeared to be another yawner except for a couple of very subtle shifts in progress.
Before we get to that, I’d like to bring something up as a reminder. We, traders and investors, sometimes forget that, in addition to buying and selling, there’s a third action we can partake. We can wait. And, that may not be a bad option in this type of range bound market. I haven’t seen much trading opportunities except for hedging against my long positions and some usual nibbles on technical patterns. There’s really nothing experimental enough to make it to this journal.
Anyhow, one of the subtle shifts is in the contrarian indicator I use comparing the market action to the Total CBOE put/call ratio. I use Wilshire 5000 to cover broader market. Rising ratio indicates bullish sentiment as the market advances at a faster clip than total put option (short) to call option (long) ratio. Rising ratio usually correlates with rising market.
This chart shows the recent rising trend of this ratio had started to breakdown. It began to pull away from the upper channel trendline (parallel blue trendlines) and forming a series of lower highs in the process of this pullback. It had also fallen below the lower channel trendline and had stayed there for a couple of days. In addition, its 20-day simple moving average, blue centerline, had begun to break to the downside. Of course, this moving average trendline is also the centerline of the Bollinger Band. These are confirmations indicating that this ratio had just topped out.
Next, let’s take a look at the CBOE Total Put/Call Option Ratio itself. This chart shows the Total Put/Call Option Ratio seems to be in the process of reversing its recent downtrend. Higher put to call ratio usually correlates with bearish market sentiment. While this process has been confirmed by a series of higher lows, the actual reversal has not. The actual reversal can only be confirmed when a series of higher highs is formed. And that’s not happening yet. However, the fact that it didn’t close below the 20-day moving average (blue centerline) is another solid step towards the reversal.
So, we will see... Just call me Papa Bear.
Looking through 20 of my daily indicators, everything looked pretty much the same. Bears and Bulls spent another day at a standstill. I guess I didn’t really miss anything going in and out of meetings all day. None of my stop or limit orders got filled. It appeared to be another yawner except for a couple of very subtle shifts in progress.
Before we get to that, I’d like to bring something up as a reminder. We, traders and investors, sometimes forget that, in addition to buying and selling, there’s a third action we can partake. We can wait. And, that may not be a bad option in this type of range bound market. I haven’t seen much trading opportunities except for hedging against my long positions and some usual nibbles on technical patterns. There’s really nothing experimental enough to make it to this journal.
Anyhow, one of the subtle shifts is in the contrarian indicator I use comparing the market action to the Total CBOE put/call ratio. I use Wilshire 5000 to cover broader market. Rising ratio indicates bullish sentiment as the market advances at a faster clip than total put option (short) to call option (long) ratio. Rising ratio usually correlates with rising market.
This chart shows the recent rising trend of this ratio had started to breakdown. It began to pull away from the upper channel trendline (parallel blue trendlines) and forming a series of lower highs in the process of this pullback. It had also fallen below the lower channel trendline and had stayed there for a couple of days. In addition, its 20-day simple moving average, blue centerline, had begun to break to the downside. Of course, this moving average trendline is also the centerline of the Bollinger Band. These are confirmations indicating that this ratio had just topped out.
Next, let’s take a look at the CBOE Total Put/Call Option Ratio itself. This chart shows the Total Put/Call Option Ratio seems to be in the process of reversing its recent downtrend. Higher put to call ratio usually correlates with bearish market sentiment. While this process has been confirmed by a series of higher lows, the actual reversal has not. The actual reversal can only be confirmed when a series of higher highs is formed. And that’s not happening yet. However, the fact that it didn’t close below the 20-day moving average (blue centerline) is another solid step towards the reversal.
So, we will see... Just call me Papa Bear.
David
#board-3693
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