Hello again folks. We know it's been pretty quiet at PBT lately. Perhaps PBT and I were too busy riding the rails to bother to peck out a post or two (or earning our paychecks...). Regardless, I hope you'll find something worth chewing on in this week's review.

I left you two weeks ago with some advice on entering new short positions using the short ETFs SDS and QID. The S&P couldn't even muster enough of a rally to properly test resistance at its 50 day moving average (DMA)--my preferred short entry--and instead fell steeply from 1360.

The past two weeks were a sell-fest. Each week volume started low and accelerated as the indices sold off during the week. Of course, what we want to see is low volume declines and high volume gains, not the other way around.

At this point in the game it is best to sit back and watch the market test earlier lows. I only consider initiating short positions when an index is finding resistance at a key level and these are nowhere in sight anymore. I've marked on this week's charts some possible support/resistance levels based on the price action of weekly charts.

Notably, the Dow has now made the bear market official by hitting the oft-cited 20% down mark.

For weeks now the only game in town has been stocks tied to commodities--oil, steel, fertilizers. I suppose you could try trading these, but it's risky. Take our recent discussion of Lindsay (LNN) as an example--an agro play with strong growth which fell hard on missed earnings. I don't think we'll see a meaningful rally in stocks until we get a significant change in the trend in oil prices. For me, this means a break below the 40DMA and finding some resistance there. Instead, at the end of the week oil closed above $140 for the first time. I find the June price action promising as it traded basically flat for the month.

However, I find the VIX and put/call ratio discouraging. The VIX has found resistance at 24. We've seen the VIX spike above 35 at the bottoms in January and March. So, we aren't seeing the panic selling yet.

The put/call ratio backs this up as well. We saw daily spikes around 1.5 at those points with a 10DMA significantly above 1. The massive selling in the market the past two weeks hasn't pushed the average much above 1 nor have we seen the massive spikes we saw earlier in the year.

In short, the market isn't looking "bottomy" to me, but it is too far below good resistance for me to recommend a new short position.

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