Pull the trigger with confidence.

The Baltic Dry Index (BDI) makes for an interesting but imperfect leading indicator for the movements of stock prices.  I don’t know exactly why this works, and why occasionally it stops working, but the relationship has been going on for years and so at some point one just stops asking why. 

In this week’s chart, the plot of the BDI is shifted forward in the chart by 26 trading days.  I have used 24TD before, and at the moment a 26TD lag time seems to be working better.  I do this shift... Read More

The fallout from the SVB (Silicon Valley Bank) collapse has finally put fear into the hearts of investors, and especially options traders, pushing up the VIX from the low 20s to a close of 26.14 on March 15, 2023.  That took the VIX Index up above the prices of all of its futures contracts, which creates a unique oversold sentiment situation that is the subject of this week’s chart. 

For any sentiment indicator like the VIX, analysts want to know what “high” and “low” readings consist of. ... Read More

The ratio of total Nasdaq volume to total NYSE volume can be used as a decent sentiment indicator for the stock market.  It is not without its problems, though, so one can learn to deal with its vagaries. 

This week’s chart shows that ratio, smoothed with a 10-day simple moving average to see past the noise in the data.  It correlates pretty nicely with the movements of the Nasdaq Composite Index.  When it gets up to a high level, it helps to mark a top, especially at the moment when it... Read More

Normally the big monthly Employment Situation Report is released on the first Friday of every month, and so normally that would mean March 3.  But because of a complicated formula for how such information is released by the Bureau of Labor Statistics, and because February is a short calendar month, this time the release is not until March 10.  So we all get an extra week to contemplate what the numbers are going to do.

I am expecting that the recent months’ nice numbers for unemployment are... Read More

Last week I wrote about the Advance-Decline data for “high yield” bonds, which are reported every day by FINRA at this website.  They also report Advance-Decline data on the “investment grade” bonds there, and those data are sort of useful for tracking extremes in that portion of the bond market, which tends to act more like T-Bonds whereas the high yield bonds act more like the stock market.

Since I have those data on each of the categories of bonds, it occurred to me a few years ago to... Read More

The SP500 broke out in 2023 above the year-long downtrend line that everyone has been watching, and has been struggling a little bit in February 2023 trying to extend that breakout.  While it looks like just a pause for the SP500, the underlying weakness is evident when we look elsewhere, especially among the investments which are the most vulnerable to liquidity problems, the high yield corporate bonds.

HY bonds trade more like the stock market than like Treasury bonds, because HY bonds... Read More