Preliminary Plantar Aspect

This market is starting to remind me of late 2008

, beginning 2009. The VIX is raised and our own Market Timing Indicators are lower. However, we are not really close to the pitiful condition that was around back then by a long shot. For example, the VIX strike an remarkable high of $80.86 on November 20, 2008 and it struck a higher of "only" $45.79 on May 20, 2010 when the Mighty Dow fallen 376 points.

However most people realize from long experience that when the Buy/Sell Ratio, BSR, moves below 0.20, the market is substantially oversold and it's time period to be searching for an explosive recurring in stock prices. Indeed, the BSR closed at 0.12 on May 20th and the market rebounded to the extent that will the Color Guard signaled a green light in the Price column on June 3rd. Admittedly, this kind of recurring appeared to be merely a teeny jump compared to the 30-day rally which followed the November 20, 2008 selloff, but it has great importance in that it failed to build up into a safe economic recovery as did the November 2008 rally. In both instances, the market moved to reduced lows. In 2009, the final low occurred on March 9, 2009 and in the current illustration, the Price of the VectorVest Composite strikes an intraday very low of $22.69 per share on Tuesday, June 8th. Will this be the ultimate low for this economic downturn?

It could be, but don't bet the farm. The good news is that the June 8th intraday low of $22.69 was two cents higher than the previous intraday low of $22.67 hit on May 25th. The bad news is that the BSR closed at 0.13 on May 25th and 0.11 on June 8th. I would have liked to see it close above 0.13, but there's still more good news. The market has hit higher intraday highs and higher intraday lows each day since Tuesday, June 8th.

The best news is that the Futures took a real shot this morning due to a poor Retail Sales report, but recovered quickly on a better-than-expected Consumer Sentiment report. This shows that bargain hunters are alive and well. But they aren't as greedy as they should be. Upside volume has been weak and leads me to label the June 8th low as a Tentative Bottom.

Taming THE TIGER With BEAR CALL CREDIT SPREADS.

Due to the excessive unpredictability we were having in late 2008, we made a series of reports along with the concept of "Taming the Tiger," i.e., dealing with volatility. The way to complete this, we said, appeared to be to carry out low-risk trades by hedging your bets. On 12/05/08, for example of this, we highlighted how in order to protect yourself by securing your small stock trades by obtaining out-of-the-money Call Possibilities. We then followed way up with more presentations incorporating this theme. These days are the point in time to re-visit this decreased risk way to making money. To find out the way it is completed, visit the VectorVest University in order to find Mr. Glenn Tompkins, who, by the way offered our first Taming the Tiger presentation, present this week's excellent "Strategy of the Week" presentation, "Taming the Tiger with Bear Call Credit Spreads."

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by: Ray Bishop

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