Todd Market Forecast: Option Buyers Getting Frightened

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Posted by Steve Todd - Todd Market Forecast

on Friday, 09 February 2018 06:19

For Thursday February 8, 2018 3:00 PM Pacific.

DOW - 1033 on 2283 net declines

NASDAQ COMP - 275 on 2080 net declines



STOCKS: On Tuesday I said that we would probably get at least a partial retest of the lows. Well, this was more than a retest. Most important indices closed under the previous closing lows and intraday lows. The Dow and Russell 2000 were exceptions, but not by much.

Was there any good news? Actually yes. The put call ratio finally expanded to 1.15 showing that option buyers are finally getting scared. Also, we're starting to hear bear market talk after so many market commentators were advising buying into the decline. In other words, sentiment is starting to come around.

Also, our traders have managed to largely avoid this drop. The SSO is down 8.29 for the year. Traders are up 6.85. We'll discuss more about our short term posture on tomorrow's update.

GOLD: Gold bounced $6. We still are getting higher rates and a higher dollar. Looks like a bounce within a downtrend.

CHART: Help may be on the way. We're seeing panic volume for the ETF of the NASDAQ 100, QQQ. These volume spikes tend to come at multi week lows.

Screen Shot 2018-02-09 at 6.19.52 AM

BOTTOM LINE:  (Trading)

Our intermediate term system is on a buy.

System 7 We remain in cash. Stay there for right now.

System 9 We are on a buy from Friday Feb. 2.

NEWS AND FUNDAMENTALS: Jobless claims came in at 221,000, less than the expected 235,000. Nothing of importance on Friday.

INTERESTING STUFF: In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing. --------Theodore Roosevelt


TORONTO EXCHANGE: Toronto lost 265.

BONDS: Bonds made another new low for this move.

THE REST: The dollar moved higher. Crude oil was down sharply again. Good for the latter.

Bonds --Bearish as of Jan. 9.

U.S. dollar - Bullish as of Feb. 5.

Euro --- Bearish as of Feb.5.

Gold ----Bearish as of Jan 26.

Silver---- Bearish as of Jan 26.

Crude oil ----Bearish as of January 30.

Toronto Stock Exchange----Bearish as of January 29, 2018.

We are on a long term buy signal for the markets of the U.S., Canada, Britain, Germany and France.  


Screen Shot 2018-02-09 at 6.22.23 AM

Monetary conditions (+2 means the Fed is actively dropping rates; +1 means a bias toward easing. 0 means neutral, -1 means a bias toward tightening, -2 means actively raising rates). RSI (30 or below is oversold, 80 or above is overbought). McClellan Oscillator ( minus 100 is oversold. Plus 100 is overbought). Composite Gauge (5 or below is negative, 13 or above is positive). Composite Gauge five day m.a. (8.0 or below is overbought. 13.0 or above is oversold). CBOE Put Call Ratio ( .80 or below is a negative. 1.00 or above is a positive). Volatility Index, VIX (low teens bearish, high twenties bullish), VIX % single day change. + 5 or greater bullish. -5 or less, bearish. VIX % change 5 day m.a. +3.0 or above bullish, -3.0 or below, bearish. Advances minus declines three day m.a.( +500 is bearish. – 500 is bullish). Supply Demand 5 day m.a. (.45 or below is a positive. .80 or above is a negative). Trading Index (TRIN) 1.40 or above bullish. No level for bearish.

  No guarantees are made. Traders can and do lose money. The publisher may take positions in recommended securities.  


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