Thursday, May 21, 2009

Let the slide begin...

after a small retrace to about 90 (38.2% fib). There is a chance that we stop at the 23.6% fib (which is where we are right now).

This wedge started in early February. Tuesday we had a throw under followed by a strong rally in the VIX:SPX on Wednesday, though we closed within the wedge. There is room for us to sink back down in to the wedge a bit (hence a small rally) before we finally break the upper trendline for good. Again as with the chart above we could open up above the trendline causing the upper wedge trendline to become the new support.

So far this is looking pretty good. It looks like a long slide has started.
Finally we look at the CPCI:CPCE ratio. CPCI is the put call ratio on the indices, which is generally thought to be the big money, while CPCE is the put call ratio on equities, which is generally thought of as retail. The ratio of the two gives an idea of how the big boys are betting relative the retail investor. Looking at them in terms of moving averages gives a smoothed out representation. Right now it seems the big money is betting short...REALLY short compared to the retail investor. is a repost of the Monthlies with extremely long trendlines. Looks very kiss of death like if we end the month here.