IRA Investing: Indicators Bullish, but Not Extremely

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Another disastrous week in the stock market, but at some point the bad news will have been fully discounted and my indicators are suggesting that we may be nearing that point.

Before looking at those indicators, though, I want to let you know that I will no longer be writing this column for RealMoney. For a host of personal reasons, including setting up a second home in Texas, I find that I no longer have time to continue with writing a column like this. I would like to take this opportunity to thank all of my readers and RealMoney for allowing me to contribute for the last two years.

Hopefully, I have helped in some small way to increase your understanding of investments and even to help you achieve better investment results. If for any reason you would like to contact me, please email me.

My indicators are now all in bullish territory, although not yet at extreme levels that would normally be associated with a major bottom in stock prices. The difference in confidence levels between smart and dumb investors increased sharply last week as smart investors became more confident in a recovery. However, the indicator is not extremely bullish.

Similarly, the money flow into the Rydex family of funds remains bullish as more money is flowing into the bearish funds. This indicator is still not at extreme levels, though.

The chart below shows a four-week moving average of the CBOE equity-only put/call ratio in red. The S&P 500 is shown in black and the green trendlines relate to the average of the indicator and its standard deviation. The chart has been adjusted to remove long-term trends in the indicator.

Detrended CBOE Put/Call Ratio vs. S&P 500

Last week saw an increase in put buying as the market swooned. This caused the indicator to increase back into bullish territory, but a further increase would be necessary before a tradable market rally can be expected.

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At the time of publication, Moore was long 3Com, Iamgold, Lincoln Educational, USA Truck and SPDR Gold Shares, although positions may change at any time.

Richard Moore, CFA, has 40 years of experience in various facets of the investment business. He has been employed by banks, mutual funds and investment advisory organizations during his career and has also owned retail and service businesses. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Moore appreciates your feedback; click here to send him an email.