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October 28, 2009 at 08:00 PM
The Dow’s push beyond 10,000 has covered up many of the disturbing numbers floating around. Of course, Wall Street doesn’t mind you thinking that everything is all right. For those willing to read between the lines, this article aims to provide some serious food for thought.
Yes, the stock market can be viewed through many lenses. Today, we take a look at some troubling short and long-term indicators:
Disturbing Fact #1: Volatility Index (VIX)
Over a year ago, the VIX was hovering just above 20 which is indicative of extreme complacency. It was no more than a few days later that the stock market plummeted 30 percent in 30 days. October 2008 was when fear returned to Wall Street. A few days ago, the VIX, for the first time in over a year, traded at 20.1.
Disturbing Fact #2: Investors Intelligence (II)
Investors Intelligence (II) tracks buying and selling climaxes on a weekly basis. Buying climaxes take place when a stock makes a 12-month high, but closes the week with a loss. These are a sign of distribution and indicate that stocks are moving from strong hands to weak ones.
According to II, investors who sell into buying climaxes are right about 80 percent of the time after four months.
Last week, II recorded 253 buying climaxes and just 8 selling climaxes.
The first two weeks of October saw 597 buying climaxes and only 41 selling climaxes.
