Tuesday, May 19, 2009

Waiting for Higher VXO

Top Line: The stock market had difficulty making any headway during the day and ended with a significant sell off. The market seems to want to go down. The next several weeks could give us some good buying opportunities.

The first thing we noticed was that the VXO managed to dip to 28 with about an hour to go. This was enough to spark a selloff. Here is where we see sentiment getting a little ahead of the market. Bullishness picked up a couple of weeks ago just as the market was peaking for this move. Since then the volatility indexes have continued to fall suggesting that the market is going up, too. However, that is just not happening. So, we see sentiment improving just as the market is about to drop.

What has managed to move up over the past few weeks is GDX. GDX traded near 39.5 today after trading around 36 two weeks ago. But, as the market faded at the end of the day, GDX fell as well. We were having a pretty good day until then. We keep wanting to see it with a 4 handle, maybe next week or maybe next month. oh well

The focus we have should stay on the coming drop in prices which may be here now. A couple of weeks ago the SP500 pushed up to 930 and that is looking more and more like the first wave top. We were expecting a little higher but the market has probably spoken and we need to listen. We have been talking about the Pause and we seem to be in it but the market keeps popping up giving a possible higher high but it just can't materialize.

The main reason we see that the market has been having trouble going up is because it's Supposed to be going down. We think that the buyers will show up at higher prices than most think. There are some buyers or bears that think the market will drop significantly from here but we just don't see it. Of course, we don't have perfect future vision as you well know but the market needs to go up and this down trend shouldn't be too deep. We would like to get some stocks at cheap prices, too but you may remember that we Did get some good prices on what we currently own.

Let's be careful about this drop that we don't do anything that we will regret. If we get some good prices we will be happy. We did notice that natural gas dropped below $4 again and may be something we want to consider again. Other ideas may emerge as the market drops. Remember that we want to see the volatility indexes jump back up, with VXO maybe going back into the 40's during this down move. Let's be patient.

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