Charts to Watch

Here are two charts I watch to get the confirming signal that the trend has really made a turn. The first is the VIX/HYG spread shown in the following chart.

The VIX (volatility index) in blue is floating near the 14 level which is a very high level of complacency - no fear. The high yield bond ETF is approaching a new high for the last 3 years. We need to see the VIX rise sharply which will signal a change in investor sentiment from bullish to bearish.

The window in the middle on the chart is the daily SP500. It is trending higher at the moment.
The lower window on the chart shows the spread (difference) between the the VIX and HYG. The greater the difference the more likely a change in trend is near.

The second chart is the Institutional Investor Index. These are the big guys in the commercial buying and they tend to lead the pack. Right now we have a chart that shows the index is still under the long term upper trend channel (blue line) and the index is still making lower highs which is a bearish signal. If the index breaks out above the trend line and can hold the new level it is likely that we will see the market go much higher before retracing.



We are at or very near a significant change in trend ......... be patient. Bernanke also realizes the fact that things are slowing down and he had to make an intervention before the open. Sooner or later the folks will realize he's just blowing smoke to keep the market levitating.

Close to a top but no cigar as yet................. ?

Below you will find a series of charts that should tell you that further upside in this market, at least in the near term, is beginning to look a lot riskier by the day.

But first ......with a very crystal clear chart and commentary, this is the reason the Government continues to lie to everyone and generate bogus data to reinforce the lies. The chart from Shadowstats.com (shadow government statistics) via TheBurningPlatform.com, shows you where the real rate of inflation is running today in blue. The lie from the government is in red. If Bernanke had to publish the rate at 10% he would immediately have to start raising interest rates to combat the run away inflation. If he did that the increase in interest rates, even if it was just 5%, would cause the payment on the National Debt to go from $440 billion per year to $1.7 Trillion per year and that my friends would be game over ..... no more lies. We're broke!

So in keeping with the dissemination of lies, here are a few more charts that show how hard it is for the Bureaucrats to continue lying about all the good news that Lord Obama has wrought with straight faces. But as long as the "Muppets", a phrase Goldman Sachs is fond of when referring to its clients, believe the garbage they are being fed, all is well in the kingdom.

Chart and Comments from ZeroHedge.com

With a win loss record lately of 11 misses out of 13 economic data points, this mornings release of New Home Sales made it 12 of 14 as they missed horribly. Against an expectation of a +1.3% gain, new home sales fell 1.6% MoM but what is even more shocking (and surely in retrospect would have caused the market to subside aggressively) is the massive revision of the previous month. From a -0.9% 'modest' fall, January's data was revised to a massive 5.4% drop MoM - the largest drop in 13 months! This is the largest downward revision since March 2009. Perhaps KB Home is not the outlier and the 80% rally in the Homebuilder ETF was a little overdone. I think there have been 20 or so calls for a bottom in housing. Will the Momo's ever learn.

Chart from article at ZeroHedge.com

The Citigroup Economic surprise indexes at the right show we are beginning the rollover that's been long overdue. Just another sign that caution is warranted.






The charts above continue to show the green shoots rally is really a liquidity driven "hopium" frenzy created by Mr. FED. The charts below may be of interest for those of you not familiar with the Bradley Stock Market Forecast Model. You may want to keep a copy of the next chart just to see how well it does for the balance of the year. (Notice the major turn date of 3/16 shown on the chart)


The inventor of the chart is a Donald Bradley who in the 1940's provided numerical values to the astrological planet configurations and thereby created a value graph shown to the left. The key to understanding the graph is to remember that it provides good evidence of possible turning points but it does not forecast magnitudes for the move. Using the chart along with other key indicators you can decide whether the next change in trend is likely to be up or down. The next chart shows you how the forecast is doing so far this year on the Dow.

Caution remains the name of the game for the short term

Double Top in process ..............?

What do you do in a market that is creeping along?  Well here's a quote from an expert;

"One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do. Most people, always have to be playing: they always have to be doing something."
Jim Rogers

That's good advice. The reasons are may as can be seen on the following chart of the daily NDX (Nasdaq 100). We are approaching a double top situation with the price level and the price is running in rising wedge channel deemed to be bearish. However, nothing has happened so far. Longer time frames are also holding steady or moving slowly sideways. I chose the NDX because it is moving higher but before you get too excited the only stocks driving it are Apple and Google. Not a good sign.

The lower windows on the chart are momentum indicators and for the most part are rising but starting to wane in strength. This week's big to-do about the blow off expectations for the jobs numbers was a real dud and fell more in line with the expectations which left the market gasping for breath on what to do. Mostly nothing.

The Ides of March are coming and we should see a little action this coming week if Bernanke's pontifications at the Fed Meeting don't include some positive reference to a possible QE3. Most forecasters   now seem to feel the Fed is done easing unless the White House needs some pickup in their rating numbers before the election.

Investing plans should be on hold at the moment until it is clear which direction the market is going.

Lacking confirmation .................

Before I roll out the charts questioning the lack of confirmation from the sibling indexes, here's a snipit from Zerohedge showing just what a game the robots have made of the the market. Somebody's trying to play us for fools. That 13,000 number must be written in every market alogorithim on the planet. Notice to what extent the market is being whip sawed as it approaches the twilight zone.........

Forensic Analysis Of Yesterday's Market-Close Mini Flash Crash Submitted by Tyler Durden on 03/01/2012 - 19:13NASDAQ New York Stock Exchange SPYWhen reporting on yesterday's bizarre market action, which in addition to criss-crossing the DJIA 13,000K a total of almost 70 times in the past 4 days, saw some very curious fireworks throughout the day, we noted a very curious sell off in stocks in the last second of trading, which we jokingly (or so we thought) claimed was another flash crash. As it turns out, the move may indeed have been a mini flash crash, with all the salient features exhibited by the market on that fateful day in May 2010 when the DJIA plunged by 1000 points in seconds. Nanex, which unlike the SEC, is eager to explain and unearth strange and unexpected market moves, has performed a forensic analysis on this data, and has uncovered the same quote dissemination delay that occured during the Flash Crash, only this time not in the NYSE, but on the Nasdaq. Which, in turn should answer readers' questions whether any exchange is safe..........................................

Dow vs Trans vs Russell

Chart Right: notice how the Dow is being held up with artificial intelligence, or pure idiots, while the Trannies and the Russell are starting to rollover.

Chart Left: The McClellan New York Summation Index is starting to rollover and it may work its way into a sideways move for the next week or so. Remember the "Ides of March" are coming.






Chart Right: The Regional Bank index is sliding sideways and will soon crossing the uptrend line. We should see which way the market's going from the next move in the financials.




When you put everything together and really look at the data you will realize that Government generated data is pure BS and manipulated to such an extent that it's outright lies. This market is a Ponzi scheme at the moment and requires constant growth or it will begin to unravel. You need to be very cautious and pay attention to comments from the insiders. Note the recent statement that follows:

David Stockman, the former White House budget director:  You'd Be A Fool To Hold Anything But Cash Now.