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Friday, February 29, 2008


how now brown cow?

volatility envelopes on the s&p are ambiguously positive. there's a positive demand divergence in the recent test of 1390, but a very slight supply divergence on the recent higher lows. the supply is at such a low level that i'm not sure it shoudl be recognized, however -- signals here tend to carry more validity at higher readings. ambiguous.

the NDX volatility envelopes are also a bit ambiguous. there's clearly declining peaks of supply, but we're in the last couple days getting the first hints of rising troughs. demand has been in a pattern or rising peaks and troughs. in spite of a couple weaker days, the trends look pretty good, really -- but could change quickly.

20d hilo is not less ambiguous. the situation resembles the last emergence from a panic low in august -- where expansion in the lows is a function of the panic moving out of the 20-day window. but highs are not exuberant here -- just keeping pace, really, not leading.

it's easier to see the lack of actual new low activity by changing timeframe, here to a quarterly window. highs are more clearly expanding here and lows doing nothing. not indicating an imminent collapse, at least.

in volumes, net points and net volume are keeping pace, but the advance-decline line is showing a slight positive divergence on the test. mcclellan remains positive. 10-day participation is showing a declining double-top, but 30-day continues to expand.

on the whole, it looks like the pullback should be short-lived -- perhaps driving the 10-day participation down to oversold levels? seems likely. dropping to 1336 would get that done. but indications of a bigger pullback don't seem readily evident.

could it retest 1270? certainly.

UPDATE: on a sentiment note, the 50-day average of the ISEE all securities set a new dataset low at 102.30. the previous record, 102.76, was set on october 16, 2002.

of course, the lowest low in the nasdaq 100 was plumbed six days earlier, on october 8, at 795.25 -- which was a revisitation of support from april 1997.

that means that (by one measure, anyway) the last time options sentiment was this persistently dire was at the lowest low of the last 11 years, at the last gasp of a the worst bear market since 1974 if not 1933. amazing.

UPDATE: it appears that the CBOE equity put/call ratio closed at 1.16. the last higher close was august 6 2004 (1.28), which marked the low point of that year.


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