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Monday, September 27, 2004

VACATION TIME:

I will be on family vacation for the next week - October 1 through 11.

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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HENNY, PENNY -THE SKY IS FALLING:

W.D.Gann was right about the Sept.22 date/ Autumn Equinox forecasting a major decline in the DJIA - down 135 on that day- and still falling. As of today, it is trying to hold at the multi-zero level of 10,000, but the trend is definitely down, as we are below both the 200- and 50- day Moving Averages in the worst month of the year.
A revisit of Jake Bernstein's 1991 classic - "Cycles of Profit" - has charts of U.S. stocks back to the French Revolution - 1790 - showing major Bear markets which always retest the ultimate lows (some higher, some lower), with the 1841 low retested some 16 years later. More recent lows (1990, 1974) took about 4 years. Since we have moved up 11,000 points since 1982 and 8000 since 1994, Fibonacci retracements of .382 and .500, respectively, would land us in the mid-7000 area. Although we have never had a down 5th year in 11 decennial cycles, the months before and after could be rough.
This week's exceptional Sentiment numbers are few, with a new high in the DJIA Dividend Yield of 3.46% boding well longer term; another recent high is the IBD short interest percent, at 6.39, almost to a 5 year high of 6.78, and above January's market top of 6.1. Bearish numbers include the VIX at 14.3, cumulative A/D, reflected also in the toppy McClellan Summation, although the Oscillator just slipped into negative territory at -13. And the Nova/Ursa Index, at 17, remains very Bearish as investors put their money where ther mouth is.

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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Monday, September 20, 2004

HOPE, NOT GREED:

Most pundits in our industry use the phrase Fear and Greed to label the poles of Sentiment in investing - I prefer the kinder, gentler terms of Fear and Hope. I also firmly believe that it is a Technician's duty and benefit to examine the media heuristics and disciplines that govern our trading. For example - trading stops. Should one place stop losses at a certain percentage from the top, as IBD dictates, or use our Support lines and Moving Averages, etc.? I recently did a small sampling of my trading accounts (IRAs) for 2004, because I always had this paranoia that I wound up selling at the very bottom of the down cycle the Pain Point. As it turned out, of the 10 losses I sustained, 9 of them returned to my buy point and ran higher - to the tune of several thousand dollars. As the lone stock was a Gold stock, it validated my stock selection process in which I should have had more confidence. As a position trader I do not recommend buy-and-hold, especially in this environment, but an examination of Fear's "tipping point's" patient expansion needs to be addressed.Another area of Behavior worth exploring is whether today's investors are acting on value, or re-acting to forced moves of having to put money into our stock and bond markets. Some of these motives are historically low Money Market/CD rates, foreigners receiving Petrodollars, "outsourcing" dollars - foreigners' dollars from our record import/export deficit. Barron's mentioned an observation of W.D.Gann that the date of the Autumnal Equinox - @ Sept.22- has coincided with the tops in 1929, 1987, 1997 and 1998; there were also cycle reversals upward, as in 2001 after 9/11.
This week's Indicator extremes begin with my record high Cumulative Adv./Dec. number, a Bearish divergence with the DJIA turning down off the downward Trend Channel @ 10,400. New highs to new lows reached nearly 10:1 on the NYSE for the third week in a row. The McClellan Summation Index (ratio-adjusted) at 960 is at the highest level since the recent Feb.6 top of 10,626.

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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Monday, September 13, 2004

AUTUMN RALLY?:

Is this the promised Election year's second-half rally, or just a continuation of what looks like, on a Bollinger Band chart of the Dow, the Dixie Highway headin' South? A wise sage once said "Never predict the Price and the Date of a market in the same newsletter!". Although Economists are prone to do this based on projected economic correlations to stocks ( remember how '04 was a bustout year for earnings?), most Technicians tend to react to a shorter term possibility based on Price, qualified by Volume, over Time. A fourth tenet would have to be Sentiment, or Contrarian indicators, of various timeframes, which at extremes can give excellent signals.
Starting with the Bullish signs that could break us out of the '04 narrow Trading Range would be a high CBOE put/call ratio of 77, a low ISEE option ratio of 99 (near its year low of 82) and a complacent new recent low in the VIX. The Ursa/Nova ratio is also at a Bullish low of 17.
Indicating that we stay in the downward Trend Channel are the low Volume numbers pushing a record Advance/Decline accumulation (my numbers) and a rather lofty ratio-adjusted McClellan Summation of 841; Barron's magazine/Longboat GAC reports a huge, first-time breakout of OTCBB (speculative Bulletin Board) Volume over Nazdaq Volume, as the NAZ to NYSE Volume remains high. With the hedge fund operators (@50% of NYSE Volume) looking to not get paid this year, we might expect increased Volatility in the remaining months of '04.

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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Tuesday, September 7, 2004

REPUBLICAN RALLY:

Although historically the stock market has done better under Democratic presidents, investors seem to prefer a Republican in the Casa Blanca, as we have seen in the current rally surrounding the New York Convention. Strong sentiment indicators, like the AAII survey becoming inverted with Bears outnumbering Bulls recently, have finally normalized, as have Michael Burke's II numbers. The VIX hit a multi-year low of 13.9, indicating complacency or August boredom. Stockchart's Bullish percent, or stocks on a buy signal, finally retraced its 6% (3-box reversal) after bottoming in the high 40s.
Unfortunately, this rally might be short-lived as we zoom into the year's worst month - September! One very good indicator of mine - the Nasdaq vs. NYSE Volume ratio (speculation) hit a high of 136 which almost always spells disaster, whereas a low, especially under 100, invariably sees rallies ensue. Couple that with a record high cumulative Advance/Decline total and running headlong into the Intermediate declining tops line from February's top, and we could at least have a corrective hiatus any day.

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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