June 11, 2009 - It Will Take Really Bad News for the Market to Crash

Take a look at SPY, SPX, DIA, and QQQQ on this website. It provides the open interest put call ratios for each of these stocks/indexes.

Right now, the put/call ratio for SPY is 1.53, SPX is 1.37, DOW is 1.20, DIA is 1.21, NDX is 1.50, QQQQ is 0.98. Above 1.1, the market is bearish, below 0.90, the market is bullish, and between 0.90 and 1.1 the market is somewhat neutral. Right now, SPY and the DOW are bearish while QQQQ, the trading platform for NDX is neutral±. In a bearish market, the platform traders will go long as the put-call payout percentage is greater then with the long positions.

With comrade O in charge, he has likely given orders to keep the market going up using the PPT to provide confidence the government can pay for national health insurance, etc. He's got billions in TARP funds he can use for market manipulation and it doesn't take much.

In the past, the market was a casino with the platform traders trading bearish if market sentiment was bullish and vice versa. The PPT has thrown a monkey wrench into the mix by giving platform traders their marching orders to keep the market going up to support BHO's programs. Also, we are in a bearish sentiment market, so this helps keep the market going up. But if interest rates keep going up and some more real bad news comes out like the $US falls below 76 on forex, the market will crash regardless of the PPT and the platform traders.

As market sentiment is bearish and with the help of the PPT, the market will continue to go up until there's some type of crisis. Expect 1050 for SPX before a crash takes place. What I've found is, in a rising market, bad news is ignored and technical trading signals don't work for short traders; and conversely, bullish technical signals and any good news raises the market.

Wednesday, June 3, After Market Open

Brett Steenbarger has a good blog here to follow during the day. He provides insights into the market several times during the day as well as educational blogs. Might be worthwhile to check out.

The market has moved down, but seems to have entered trading range for the day. As Brett mentioned, it does seem odd the selling stopped when 932 was hit on the SPX - - a prior high before the latest breakout.

Tuesday PreMarket Open, June 2

The ‘jam job’ by the PPT in stocks at the close on Friday was designed to impress the Chinese and legitimize the government takeover of GM. We need to see how stocks finish today as there apears to be trouble brewing in the markets. If the S&P (SPX) closes below the 200-day exponential moving average at 943 (and dropping) on Tuesday, then closes below the 200-day simple moving average of 927 (and dropping) by the end of the week, then expect a great deal of trouble. If stocks continue to rally above these 200-day moving averages, then expect the SPX to move to 1,000 to 1,050 in coming weeks/months. These moving averages are vitally important in determining the direction of the market.

If this breakout is to be sustained, stocks need to stay above 93.22 for SPY from the May 8th high. In other words, any consolidation from here should be modest if a new up leg is beginning.