Ian Woodward's Investing Blog

When I was a little boy of four, I used to love to play Snakes and Ladders.  In this country they call it Chutes and Ladders.  We didn’t have computers in those days, but dice games were the equivalent fun back then.

I took a look at the VIX – the measure of fear in the market, and it reminded me of playing Snakes and Ladders and/or Checkers. I am in my fox hole as you should never play Snakes and Ladders with your Money on the Stock Market.  Only very nimble Moment Traders can make a buck in this Market.

Short and sweet is my message for today. Cash is King or Short the Market.  You can tell I am poking fun at the idiocy of what “Investing in the Market” has come to mean in these times.

Best Regards, Ian

The headlines from the Geithner and Fed announcements today say “New lending program targets consumers, business”, and seems to have done the trick at least for now that the Government is taking appropriate action to jump start lending in critical areas.  Gone is any mention of TARP or son of TARP, it is now TALF…Term Asset-Backed Securities Loan Facility, and will provide its first loans March 25, the government said.  The reaction during Geitner’s testimony by the markets was mildly positive.

According to the pundits, don’t expect any results until the end of the second or early third quarter altering perceptions about the economy and boosting household, business and investor sentiment.

The Market had a ho-hum reaction to all of this and essentially gave a flat return for the day on all Indexes, but the S&P 500 dropped below 700…not good.

My good friend Mike Scott reminds me of an old rule of thumb I developed many moons ago when the QID and QLD were all the burning rage back in mid 2007.  It is the ratio of the Total Dollar Volume (Close Price of the stock x Volume for the day) of the QID to the QLD.  Since then we have accumulated a vast amount of data as we have plunged from the Peak of the Market in 2007 to the recent Capitulation back in November 2008 to the retest and breaking of the lows yesterday.  The latest reading as of yesterday was 2.5:1.

The two good rules of thumb are:

1)  The Bears drive for Capitulation once again with a QID:QLD ratio of >3.3:1

2)  The Bulls Fight back to start a Fresh Bear Market Rally with the QID:QLD Ratio subsiding to <1.5:1:

You don’t have to go to all that trouble, but keep an eye on the ratio to see if we are heading for deep yougurt or starting a fresh Bear Market Rally. 

Today’s numbers are: 

QID = $67.62 x 26,818,002 = 18,134,000
QLD = $20.84 x 38,671,390 =  8,059,000

QID:QLD Ratio = 2.25:1, i.e., about half way in between the targets, so in ho-hum territory in keeping with today’s reaction, and the Bears with the upper hand.

So there you have it – a new measure of the fight between the Bulls and Bears at the OK Corral, Round #5.

Best regards, Ian.

In my last blog, I reminded you that “741 on the S&P 500 is within easy reach for
the floodgates to open to the downside.  I don’t have to remind you that with the
market as fickle as it is and already oversold for now, that any form of good news
can turn this upwards…but it is the THRUST of the move which will determine
whether it is a one or two day wonder or new hope or despair.”

Well, the stock market spoke on Friday and followed it up with opening up the
floodgates today breaking 741 on the S&P 500 to the downside.  It’s hardly worth
commenting on what has transpired since my last blog other than to say “Take your pick from past memories on this blog” with the following picture:

To drive home the points I have made recently, the following two pictures says it
all regarding watching the reaction by the Stock Market to the enormity of the plans and the uncertainty it brings in the short to intermediate term, leave alone the long term:

Where this will all end nobody knows.  We still await the second shoe to drop which
is the Treasury Secretary’s Plan which I understand is due on Wednesday, but the
Stock Market has had plenty to feed on this past week from all fronts.  Meanwhile,
I have plenty of work to do preparing for the HGS Investor’s Seminar in 2&1/2 weeks time.  I will chirp up again if anything exciting happens, but for now, Bulls hunker down in your foxholes and Bears enjoy the fun.  The direction has been clear the past ten days ever since we had that red Phoenix and two red Kahunas as I showed you in my previous blog.  This good stuff of “Impulse Indicators” works.

Best Regards, Ian.