Sunday, June 28, 2009

Market Taking It's Sweet Time

Top Line: The stock market still wants to go down but it also wants as many bulls to go down with it. Beware the volatility indexes...

The volatility indexes seem to be collapsing, meaning the fear in the market is diminishing. The latest check on the volatility indexes is that they are the lowest of the move which is a warning since the stock indexes are not new highs. Last Thursday's strong 2.5% up move gave plenty of confidence to the new bulls driving volatility indexes down. At the very least this is a bold statement that stocks are in need of a pullback to correct this bullishness. The market will have a tough time moving up if we don't get rid of some of this bullishness.

As our title indicates, the market is taking it's sweet time about going down. We're the only impatient ones. We need to enjoy this as much as possible since a strong up move will be coming as soon as we can eliminate the enthusiasm.

We say enjoy because there is still money to be made on the downside over the next couple of weeks. We are Not encouraging you to trade that way but we do think better prices are coming for those of you who still have money sitting on the sidelines. Two important indicators are the volatility indexes and the SP500 price level. We expect the VXO to go to near 40 and the SP500 to go to near 850. If one or both of these occur, we will be extremely bullish once again.

GDX popped above 40 last week and seemed to have left all of us in the dust. But, we think more buying opportunities exist for GDX, too, although maybe not as low as we saw it last week. We will continue to buy it if it drops back into the 37's and hopefully back into the 36's. That would be a good time to buy. Of course, it is possible it could break below last week's low near 35.50 but we don't think there's a very good chance for that. We would like to see that because we would like to buy more as cheap as possible.

Our other fund, the TLT, a basket of long dated Treasury bonds, traded up strongly on Thursday along with the stock market. This is not a common thing and we expect that the stock market was in the wrong last week with the bond market making a corrective up move starting a couple of weeks ago about the same time as the stock high. This occurred back on June 11th. The SP500 hit its high for the move, so far, and the TLT hit its low on about the same day. When they move together one of them is probably acting wrong and that is probably the stock market.

We promised a few people some pictures of Jackson but they will need to wait until tomorrow, so we'll put a up a quick post tomorrow with some pics.

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