Conflicting Signals

11:50am CST

After yesterday many of the technical snags that had held the bearish case were nullified. However, I continue to have concerns based on the Treasury market as well as the sentiment indicators that I follow. AAII and Investor’s Intelligence are near levels that produce market peaks. The 10dma of the OEX put/call ratio remains extremely elevated while CBOE and Equity put/call ratios remain at more than 6 month lows. On the flip side, the OEX put/call ratio had its lowest daily reading in almost a year in yesterday’s trading session. Could this be the signal of a turn to come?

Everything seemed to turn yesterday when it was announced that there would be an agreement on another voluntary haircut on Greek debt announced by the end of the week. The terms seem to be similar to what was announced in late-October so I’m not exactly sure why it will be different this time. We will have more “color” on this agreement by sometime next week.

The big picture is still a bit off in my view. I received some very solid bear market signals in September/October. The monthly MACD crossed over bearish, we saw monthly closes below the 20 and 55 month moving averages, and the 17 x 43 weekly EMA saw a bearish cross. However, it has since crossed back to the bullish side over the past two weeks. This signal generally has follow through so this is a very interesting juncture. The last time there were false signals like this on the 17 x 43 cross was back in the 1990-1994 period. Fast forward to today, are we simply looking at a multi-year range bound market from 2010-2013 or so like 1990-1994? (1075-1575 on the S&P 500?)

So the big picture has given sells but now the intermediate term trend is on a buy based on the proprietary mix of 6 internal indicators that I follow as of late-last week. The optimal period for the market to turn down has passed and has moved beyond the technical levels that should have held for the bearish case. This is looking more and more like a stock-pickers market in one must be nimble and leave capital available for hedging strategies.

I will elaborate on my thoughts in the coming days.

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