Graduate Call Blog from 5-22-08 Session -Jeff Yaede

Hello All,  In the grad call given on 5-28-08, we discussed several factors that I use to determine market direction.   We looked at the following… 

1.      Weekly chart of the S&P 500 ($SPX) with the 40 and 80 week moving averages

2.      $VIX – Volatility index      

3.      $CPC – Put call ratio 

With the VIX and CPC, we set up the chart so that we could plot how their relationship with the market.  Below is the chart setup.  Remember…you don’t need a membership to access these charts and set them up the same way as we did on the call.

 

Let’s take a look at the 3 charts.   

First we have the SPX.   Notice the resistance that is caused by the 40 and 80 week moving averages.  A strong long term bullish signal would be achieved if the market moves above its 80 week MA.  Till then, some caution is in order as strong selling tends to appear at resistance. 

 

The second Chart is of the VIX…notice how when the VIX rises, the market falls.  Notice the recent sell off in the VIX during the past months market rally.  The VIX is bouncing off of support with bullish indicators.  This has been one of the signs showing market trouble. 

The Put/Call ratio is what I use to determine whether the market is really overly pessimistic or optimistic.  It tends to be a contrarian indicator.  When there are excess calls in the market, the market weakens.  When there are excess puts in the market, the market rises. 

- Jeff Yaede