Moving to 50% Long
My downside targets have been achieved. I see a bullish divergence between the banking sector and the broad markets. This is bullish. The S&P 500 hit 1169 on todays low and fell within the 1165 to 1182 target zone and put in a reversal of nearly 300 points on the day as I write this.
We have most likely seen the extrernal flush that we have been looking for. There is still a possibility of further downside testing but this appears to be a good place to go long.
Some Indications:
- Yesterday, the put/call ratio closed near 1.5, a historic extreme suggested heavy put buying and a sign of capitulation.
- The VIX, or volatility index, has moved into the 35 area which has market the last 3 bottoms in the market.
- Since my last update, LEH, FRE, FNM have been taken out, AIG & WM very close to being taken out, MER absorbed, and a call to the end of the financial sector as whole. It is interesting to note, that in the same time period, the UYG Ultra Pro Shares banking index ETF has held ABOVE the lows that were put in mid July when the S&P 500 was at 1200. Again a bullish event.
- 1182 marks the 50% retracement on the S&P 500 from the March 2003 bottom. We held that level today. The NYSE has held right above its 50% retracement level from the March 2003 lows as well which is at 7400. We came within 100 points of that level today. There is still a chance that this level is tested.
I will be shifting my assets to 50% long the stock market in all accounts. I will wait for further confirmation of a bottom to initiate the remaining 50% of my position into this market.
