The bear is back

Two of the indicators I am watching have reached levels specific only to bear markets.

Here they are:

> a ratio of the monthly cumulative advancing versus declining volume.

> the 5 day ema of the total put/call ratio (this is not as reliable as the first one but the fact that it comes after important divergence with the bull gives it legitimacy).

This is the third time since 2010 this happens, which says enough about the unprecedented volatility of the market. I remember George Soros writing in The Alchemy of Finance that abnormal volatility usually portends an important turn, so what has been happening until now is not a good sign.


What to do about it?

Change the strategy of buying intermediate term corrections to selling intermediate term bounces (a first bounce can reach even the highs at 1420). Also, go long for the short term as the market becomes oversold.

Meanwhile, watch for signs of strength that would indicate a possible come back of the bull as it happened in the autumn of 2010 and of 2011.