Tuesday, November 5, 2013

A Ho-Hum Market Environment

As I have stated more than a few times, I am bearish on the market for a myriad of reasons including a slower economy, abnormally high profit margins, a manipulated market environment via QE, Etc. I have also mentioned that I would not be surprised if we see some sort of correction in short order, with demand dynamics (as evidenced by the price/volume heat map readings) remaining weak.

That said and at this juncture, I just don't see any market correction being anything more than a shallow and short move. For one, the weighted average standardized VIX points to a more normal market environment.

The weighted average standard VIX sits just above the zero demarcation. Although this measure tends to move considerably over time, the measure has generally remained below the one demarcation since 2011. A reading above one tends to indicate a heightened risk environment and can be associated with increased potential for a considerable market correction.For the moment, we are just not seeing that risk.

More so, my Price/Volume Diffusion Index remains above the 50 demarcation, now sitting at about the 58 level.

More often than not, the market generally rises in the future months following a price/volume diffusion index reading of 50 or better. The current reading of 58 is much improved off of the recent lows despite the choppy readings in recent weeks.

Although I remain bearish longer-term, the objective data just does not point to any major correction for the moment.

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