The market feeds the bulls another banana today, as the decline continues. I am getting hammered after dipping my toe in the water on the long side. IWM nearing my mental stop of a close below 64 (64.50 Monday). I was tempted to double up on Friday, and again today. Usually this isn't a good sign, so I resisted the impulse.
I remain mostly in cash with my toe in the frigid market waters, long IWM via short puts
GDX has a strong down reaction day, down 3.8%, even though the gold futures hold up fairly well, with GLD down only 0.23%
Random Roger has some thoughts about indicators and bear markets (link) see March 10, 2008 entry.
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Reading things like put call ratios starts to get tricky if you believe this is a bear market. This is a point in the cycle where it is easy to get fooled. The market is down almost 20%, I'm sure if you looked you could find an indicator or two to tell you the market is oversold
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Compelling as they may be, if it is a bear market all of these things will be wrong. Bear markets last longer than five months and on average go down more than 20%, closer to 3o% actually.
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Another 12% down would bring it into "average" bear market range. What if this is the "big" one? The way most pundits can tell is using their hindsight glasses.
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