Ian Woodward's Investing Blog

Stock Market: Is Uncle Ben Rolling Up His Sleeves?

Now that QE-2 is virtually over, the summer doldrums are upon us, and complacency still abounds, it won’t be long before we see a real knee jerk to the down side to wake us up.  Time is running out for Uncle Ben and one wonders what rabbit he has for the next phase of the Market cycle.  The Gloom and Doom Camp say that we are but ten years into the 17 year “locust” cycle, so expect another big leg down before we have a flourishing Market again.  With the Debt the biggest cause for concern, we wonder what Uncle Ben has up his sleeve to avoid the disaster of a double dip recession?

Let me first address the “go to weapon” for measuring Panic…it is our old friend the VIX.  I gave you this chart a few blogs ago or maybe it was in the newsletter, so let’s look at it now.  We couldn’t be at a better point in time.

The VIX is around 18, but shot up to above its 200-dma at ~20 intra-day yesterday with that big down day.  However, my good friend Maynard has chided me that I have kept this secret weapon to myself when I introduced you to the High Jump in conjunction with ATR (Average True Range).  My life and your life should revolve around “threes”, red, yellow, green; High, Low and Middle road, etc.  So the other day I dusted off the VIX in conjunction with the High Jump and the ATR…why these two items?  Because they magnify the measurement of “Panic” when it happens and enhances the chances of us spotting it earlier!  The early bird catches the worm:

I couldn’t resist that leg pull with my dear friend Maynard…they don’t come any better.   So, that makes up for all my tardiness on this gem!  It will save our skins.

Now let’s turn our attention to a follow up to yesterday’s blog, and show you the results and findings to give further clues as to oversold and Bounce Plays:

As you would expect, major damage was done yesterday to the internals of the market as shown above, but we are still not at exhaustion to the downside.  Please realize that Memorial Day is this coming weekend and things tend to get quiet around such three day weekends as this is when the big wigs trot off to the Hamptons.  I gave you the chart in yesterday’s blog note, and added the percentage of 40% for the bottom four slices to give you a quick comparison with the damage done yesterday which is shown on the following two charts:

…And here is yesterday’s results.  Lots of damage done, but always the hope that we now are leaning to an oversold market and can then expect a Bounce:

…And here for your convenience are the two pies together, showing the actual numbers for the bottom four buckets of the S&P 1500:

So what you might ask?  Well, here is a recent comparison of a Low Day back on 8/24/2010, where you will recall we had already had a ~17% correction and were retesting the lows prior to the start of the Fresh Market Rally on September 1, 2010:

We could have a ways to go if Gloom and Doom sets in.  I produced this particular chart using EdgeRater, with a tip of my hat to my good friend Chris White.  Last but by no means least, here is an extended view of the “Purple” chart, which gives us a good feel for where we are and where we could go to bottom.  Good Stuff:

So there you have it.  I hope you folks feel you get something out of all of this stuff…I am not looking for atta boys, but it would be rewarding to get some feedback or have a comment to make from others than the usual faithfuls who always show their appreciation.  As you can imagine it takes a good deal of Ron and my time with all the fodder we provide for you to keep you on the right side of the market.  Have a Happy!  Ian.

 

 

 

6 Responses to “Stock Market: Is Uncle Ben Rolling Up His Sleeves?”

  1. Paul R Says:

    Ian,

    A rare afternoon blog, many thanks! As always we appreciate yours and Ron’s market analysis to help keep us on the right side of the market. HGSI software is amazing and keeps getting better and better.

    Paul R

  2. WernerVDW Says:

    Ian,

    Rest assurred that there are many people from all over the world just like me who appreciate your blog posts very much. Some, like me, have day jobs, a family with kids to take care off. And sometimes can’t find enough time to do all of this analysis (good stuff) themselves currently.

    Some of us have been hit hard by the economic malaise and have had to take a 2nd job to make ends meet.

    I for one look forward to the day when I will have more time to this kind of an analysis myself. In the meantime I’m very thankful that I can keep learning from you (and others that regulary share their knowledge on the HGSI mailing list)! So once again: Thank you very much for all your efforts!

    Warm Regards,

    WernerVDW (from the other side of the big pond)

  3. RichardB Says:

    As a recent buyer of HGSI I’m amazed at its power, but I will happily admit to being rather overwhelmed at the moment at just how much it can do and how it all works.

    The blogs, market reports, webinars and all the other support are hugely helpful in slowly learning what HGSI can do so they are very much appreciated. Without them I’m not sure I would have got beyond the trial!

    Thank you!

  4. Tom Hamilton Says:

    The broadening powers of the Spectrum Analysis in HGSI is impressive. The ability to take a quick look at key indicators across an indexes components is great; few, if any pieces of software have this capability.
    But . . . (and there is always a “but”)

    Does this vision and data lead, confirm or lag what the index is actually doing?
    Case in point: One of my favorites is the %A/D (the % of stocks in say the S&P 1500 Index that are in stages of Accumulation, Unchanged or Distribution).
    By the time there is an obvious shift in %A/D, does the Index value already show this?

    The ability to look at key data via the Spectrum Analysis back in time during key market turns would help us answer that question. For now, I really don’t know the answer to that question . . . but I sure like the way that HGSI gives me the ability to slice large pieces of data down to an easy to understand format. Well done, “but” it sure would be nice to back-view it. 🙂
    Cheers !

  5. Charlie Willey Says:

    Ian – ther is lot more meat in this stew than per usual. I was with Garry Lalone Friday afternoon and these last two blogs were part of our conversation. I have read each of these blogs twice and plan to read them FIVE more times.

    I think there is a lot of fruit here to gather. This is like drinking from a fire hose. I look forward to the next blog.

    – Charlie

  6. Tom Watkins Says:

    Ian,

    The information in your blog posts truly does provide a unique and novel x ray of the market that amazes me. I tried day trading for a while but am about to renew HGSI and get back to the real stuff. How long do I have to commit to the October seminar? Based on what you have been revealing to us via this blog, you are really on to some very significant new stuff. Previously it was just too easy to be buying before the market turned the wrong way, but it seems that you have very scientifically figured out how to quantitatively evaluate exactly where the market is today and whether as you put it, it is time to “play” or stay out of the market. Your October seminar will no doubt tie all this together into something that I can really use. Your blog posts have been most remarkable, surprising, and phenominally accurate. Wow!! This is REALLY GREAT STUFF.

Copyright © 2007-2010 Ian Woodward
Disclaimer: Commentaries on this Blog are not to be construed as recommendations to buy or sell the market and/or specific securites. The consumer of the information is responsible for their own investment decisions.