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Vectorvest did not call a market up, but did indicate that the market appeared itching for a rally. The MTR timing model (www.mtrig.com) on March 13 2009 gave a Market Up signal. There were other indicators as well. In November 2008 Laszlo Birinyi called an S&P bottom at around 750. In January he reiterated his position and again on March 3 he said the market was extremely oversold. However one thing that did catch me was that all three times he indicated that all the usual technical models were not reliable this time, down.  Here is what he said: “A few things caught our eye. One was that we started to have some very bad days in November (2008) but the market still recovered. On Dec. 5 (2008), the unemployment news was really terrible and yet the market recovered that day, with the S&P closing up 3.7%. To us, those are signs of a positive market where people are starting to look beyond the bad news.”

He also indicated that the greatest decline in a bear market are at the end of the bear decline at around 70%. He then named some companies he liked, including GE, with a dividend yield then of 8% on the common stock. I have found Laszlo Birinyi to be very accurate on many of his calls. I watched Louis Rukeyser on Wall Street Week and Laszlo was on often and sometimes he would be the host when Louis was away. I really miss that show. Today almost all the financial shows are like watching entertainment tonight.  

The next indicator was the number of naked puts I had written for Jan and Feb. They had all expired worthless. This is unusual for me if we are in a bear market. Normally on so many positions I will be assigned at least 5 when we are in a declining market. However Jan and Feb I was not assigned at all. This told me that the decline could be reaching a climax and the Bollinger band by Mar 3 was at its narrowest. The last time this had happened to me was in Nov 2002 to Feb 2003 when the market was still being called a bear market. In Feb 2003 I had gone in and bought stocks and then worked with a stop loss, but I did not sell CC’s at that time. This was another reason to buy the stocks I did.

While it is true that the 10-20-30 rule did not give a buy signal in early March, the 10-20-30 rule (click to review 10-20-30 strategy) did show that the 10 day SMA was turning up and volume was picking up after the plunge around March 3 2009.  Also I use the 10-20-30 rule primarily to buy and sell naked puts not so much for stocks although I do plot it before buying stocks. This 10 day SMA (Simple Moving Average) was turning up on all the stocks I follow, not just a handful. This told me a trend change could indeed be happening. 

As well the bearish indicator was at an all time high. The number of bearish analysts was more than 70%, normally a sure sign to me that we are going to see a reversal.  Also the PE ratio on the S&P was below 12X, and dividend yields were very high. Bank of Montreal in Canada was paying over 10% on the dividend. Royal Bank was at 9%. In fact all the large Canadian Banks had unbelievable dividend yields. At 10% on Bank of Montreal, you could buy it and tuck it away for years – which I did. The dividend alone would pay you to hold the stock. The last 15 bear markets had seen a PE of no lower than 10.8 on the S&P. I felt that buying when I did, made sense as I saw little more downside, but if there was I believed I would be able to sell CC’s against my stock purchases. 

Last was the VIX. If you look at the VIX chart, you can see that the climax in volatility was actually in October 2008 not March 2009, and from there is had continued to decline. On October 20 the VIX hit a high of 89.3, but on March 3^rd it only hit a high just above 52. The trend in the VIX was down. This told me that the sellers were getting tired. Just like the rally since March, the VIX had continued to decline throughout the rally. You can see it in the premiums of options, that continued to decline. Right now (March 13 2009) I think the VIX could work its way to 20, which is where it was last August 26 2008.