SOS Rarely Happen?

Summary of comments for April Issue in Elliote Wave by Bob Prechter

It is rare to have technical indicators all lined up on one side of the ledger. They were lined up this way—on the bullish side—in late February-early March of 2009. Today they are just as aligned but on the bearish side.

Consider this short list:

1. 3.5% cash on average in mutual funds. This figure matches the all-time low, which occurred in July 2007, the month when the Dow Industrials-plus-Transports combination made its all-time high.
   


2. 10-day moving average of the CBOE Equity Put/Call Ratio … investors are interested primarily in betting on further rising prices, not falling prices, and that’s bearish.
   


3. VIX, a measure of volatility based on options premiums, has been sitting at its lowest level since May 2008, when wave (2) of 1 peaked out and led to a Dow loss of 50% over the next ten months.
   


4. The Daily Sentiment Index, a poll conducted by Trade-Futures.com, a poll conducted by Trade-Futures.com, reports the percentage of traders who are bullish on the S&P. The reading has been registering highs in the 86-92% range ever since last September.


5. The Dow’s dividend yield is 2.5%. The only market tops of the past century at which this figure was lower are those of 2000 and 2007, when it was 1.4% and 2.1%, respectively.


6. The price/earnings ratio … has improved tremendously … but … is in the area of the peak levels of P/E throughout the 20th century.


7. The Trading Index (TRIN) … the 30-day moving average of daily closing TRIN readings has been sitting at 0.90, the lowest level since June 2007. … Usually long periods of low TRIN exhaust buying power.

MyView

How often can you find 7 indicators that points to the BEARISH market, once every 80 years. So what should you do when you sees one. Two options, first the save options, stays out of the market and wait until market crash at least 50% before reenter.

A more aggressive option is to SHORT SELL the market, with leverage. After market is down more than 50%, consider to go in SLOWLY i.e. concentrate on dividend yield stocks.