Further thereto.............2cs
Bearish sentiment, measured by the 2CS (the 5 day total of the daily product of the
CBOE VXO and daily CBOE Put/Call ratio), has dropped to 75 as of Friday. A month ago at the last low 2CS was 128. This is a capitulation by the market bears which added under 100 SPX points. To the contrarian, this is a bearish sign.
Look here at my last charts of long term and short term 2CS. The crucial point now is that 75 is about the level of 2CS I have observed at the end of major bear market rallies, as in May 2001 and March 2002. Note that at the end of bull market major rallies 2CS can fall into the 60's, 50's, or even high 40's.
What would make this call wrong? Smashing up through the 80 week moving average of SPX or seeing the 2CS fall under 70 would change my mind, and and it would imply that a new bull market started in March.
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