Measuring the Dow BearsStrength of Dow bears will affect KLCI Bulls
After breaking through the critical 7,882 support line, the Dow bears are now aiming at the ultimate bottom prize of 7,449 which was last November’s low. With only 106 points to go, can the bears make it and create new lows? In this report, we will gauge the tenacity of the Dow bears.
The Dow is now obviously bearish with a downward expansion of the GMMA trend lines.
Comparing the width of the downward expansion historically, it can be stated that the Dow is now reasonably bearish, though its bearishness is nowhere near the bearish levels of the October-November periods of last year when the Dow created its ultimate November low.
Comparing the width of the downward expansion historically, it can be stated that the Dow is now reasonably bearish, though its bearishness is nowhere near the bearish levels of the October-November periods of last year when the Dow created its ultimate November low.
The Dow is also drifting below all of its MAV lines and its sizable distance below its short
term MAV lines would suggest that the bears are currently in-form and actively scouring the US markets.
Measuring Dow seller strength : The Market finds a bottom after the last seller has sold The CBOE Put Call ratio is a good way to measure selling strength in the US markets. Basically the Put call ratio measures the volume of the Put Options over the Call options. A decreasing trend shows a decreasing amount of sellers in the market. We are pleased to find a trend of decreasing sellers in the S&P market, suggesting that less bearish sellers are willing to bet short on the US markets, in comparison with long buyers. This would suggest that although the bears are now prowling US markets, their strength may be capped, and we may find a bottom soon – after the last big seller has sold.
VIX Index : Validating the reasonable strength of the Bears
The VIX Index is now moving above the short term and mid term lines, indicating a reasonable amount of fear and volatility in the markets and validating the current strength of the bears. However, the VIX Index is nowhere near the peaks of the Nov-Oct period of last year, indicating that the strength of the bears may be capped for now.
Conclusion : Bears strong enough to find new low, but strength capped.
Our conclusion is that while we find the Dow bears reasonably strong, but their strength may be capped due to the fact that the amount of sellers relative to the amount of long term buyers are decreasing.We see the bears establishing new lows for the US markets, but it won’t be far away from the current 7,449 ultimate low. A capped downside in the US markets will also cap the downside for the KLCI in the mid term.
term MAV lines would suggest that the bears are currently in-form and actively scouring the US markets.
Measuring Dow seller strength : The Market finds a bottom after the last seller has sold The CBOE Put Call ratio is a good way to measure selling strength in the US markets. Basically the Put call ratio measures the volume of the Put Options over the Call options. A decreasing trend shows a decreasing amount of sellers in the market. We are pleased to find a trend of decreasing sellers in the S&P market, suggesting that less bearish sellers are willing to bet short on the US markets, in comparison with long buyers. This would suggest that although the bears are now prowling US markets, their strength may be capped, and we may find a bottom soon – after the last big seller has sold.
VIX Index : Validating the reasonable strength of the BearsThe VIX Index is now moving above the short term and mid term lines, indicating a reasonable amount of fear and volatility in the markets and validating the current strength of the bears. However, the VIX Index is nowhere near the peaks of the Nov-Oct period of last year, indicating that the strength of the bears may be capped for now.
Conclusion : Bears strong enough to find new low, but strength capped.
Our conclusion is that while we find the Dow bears reasonably strong, but their strength may be capped due to the fact that the amount of sellers relative to the amount of long term buyers are decreasing.We see the bears establishing new lows for the US markets, but it won’t be far away from the current 7,449 ultimate low. A capped downside in the US markets will also cap the downside for the KLCI in the mid term.
HAPPY TRADING FOLKS!!!
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