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U.S. Markets: A bottom in sight

Posted February 11, 2008

"Corporate insiders are buying in a big way. Is this another sign of a potential market bottom in the making?" — Mike Burnick

by Mike Burnick, The Sovereign Society

Baltimore (TFN) — Several "sentiment" indicators are saying that there's an extreme bearish outlook on stocks right now. That's what's been feeding the current sell-off. Taken as a "contrary" indicator of excessive pessimism, such readings have often signaled important market bottoms in the past.

The VIX index measures the increase in volatility on put and call options for the S&P 500 Index. Investors are willing to pay higher premiums for these options right now because they're scared to death and seeking protection.

The VIX is literally a "fear gauge" for the markets. It recently spiked to its highest levels since 2003. That signaled the final stages of the last bear market. And a new bull was born.

It's also handy to know the ratio of trading volume in puts versus calls. Again, recently the volume in protective put option purchases has soared compared to call options, because everyone and their brother is betting against stocks.

Call options of course are bullish bets - that stocks should move higher. Few investors are betting that way right now. Instead, the bearish side of the boat is getting mighty crowded.

U.S. Markets: Insiders Back Up the Truck

Add one more indicator to the list of "bullish" sentiment readings: Corporate insiders are buying in a big way. Is this another sign of a potential market bottom in the making? Read on to learn if the U.S. market has really found a bottom.

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