News

Loading...

Monday, December 27, 2004

HNY! AND MANY HAPPY RETURNS FOR '05:

As I update my many Sentiment Indicators this Monday after Christmas weekend, most of which are extremely overcooked, I watch the DJIA slip from +20 to -20, and wonder how many hours/days are left in this ballistic rally before a correction of some type.
CBOE Equity put/call:
58VIX: recent record of complacency at 11.2
ISEE electronic exchange: back to a high of 227 a/o Friday (today's is 337!)
A/D ratio screaming with the McClellan Summation overbought
New Highs to Lows: 25 to 1
Market surveys, U of M and UBS numbers at highs in Bullish confidence
Nasdaq Volume to NYSE: 150
Bullish %: 78, the 3rd highest level in years
Finally, Specialists' shorting (late figures) rising steadily

As helpful as many Sentiment Indicators are, one of the problems with them, aside from their inexactness, is which are heuristic myths perpetuated by the media due to a small sampling, and which indeed are seasonal or cyclical events. For example, since the DJIA started before 1900 there has never been a down 5th year, in fact major rallies have occurred in every one. And though the average year was up 26%, the odds of this year hitting exactly 26% are way low. Even with small sampling, a 100% accuracy has to be at least considered with other analysis. Other larger samplings of calendar data include: over 50 years, only 5 January effects have not held up - where January's market action dictates the whole year; over 60 years December has been the best up month at +1.8% AVERAGE; over the past 30 years the last week of the year has AVERAGED +1%; the AVERAGE Bull market lasts 2.6 years, and we have gone 2.2 years since August 2002.

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


Subscribe in a reader


Share/Save/Bookmark

Tuesday, December 21, 2004

HOPES AND FEARS FOR ALL THE YEARS

I've always maintained that the market phrase "Fear and Greed" should be "Fear and Hope" encompassing a wider range of investors. The latest Contrarian hope is that the Dollar is about to rally after its steep decline. A Barron's article posits a 5% Bullish stance on it, although it may retest the low in a late January shakeout. Another seasonal anomaly should be revealed this Thursday as Tom Herschfeld will appear as guest on the Nightly Business Report and tout his Closed-End Fund theory about a selloff at year-end, only to rise sharply in the opening weeks of '05. Muni and Gov't Bond funds are examples: NCP,NCA,MUC, et.al. Barron's Abelson also reports 6 corporate Directors Selling for each one Buying, an often extreme market negative. Longer term, Schwab's Ken Tower reminds us that we are 561 days into a secular Bull market which averages @800 days (mid-November of '05).
More accurate, I've found over 4 years, is the Rydex Nova (bullish) fund vs. Ursa (bearish) ratio which is now quite high at 41. Like most Sentiment Indicators and Technical Oscillators it reflects a majority trend in which the public is correct UNTIL the turning point, so it serves more as a Yellow light. Although the recent Trading Range has quieted down some Indicators, others remain near Bullish extremes (bearish): the VIX at a low 11.95; Investor's Intelligence Bullish % at 62.1 - Bearish at 21.1; Market Vane Bears at 19.2 and Chartcraft's Bullish per cent at a toppy 76. HAPPY HOLIDAYS!

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


Subscribe in a reader


Share/Save/Bookmark

Tuesday, December 14, 2004

ADD - AMERICA'S DEFICIT DISORDER:

Even with a record high deficit number sure to slow the Economy, a 5th Fed rate hike, 21 IPOs this week, and a quarterly Quad Witching expiration where institutional traders usually reframe their future positions, Sentiment Indicators still show much complacency. Although a few came off their extreme highs of last week, such as the Nova/Ursa ratio, new highs and advance/declines, NAZ to NYSE Volume ratio - others remain high.Both put/call ratios - CBOE Equity and ISE are extreme (62 Bulls and 259 c/p) Burke's I.I. survey shows Bulls at 60.8%/ Bears at 21.7% and the Bullish percent near its topping point.Previously mentioned Welles Wilder Delta Phenomenon, which forecasts 6 cyclical turning points every 4 years, indicates an upturn @ Dec.15 which tops out mid-April, much like the accepted wisdom of up Dec./Jans and 5th decile year bullishness. Going against that, however, is the 5th rate hike average history of Steve Leuthold, who cites:
7 days: -1.44%; 22 days: -1.12%; 126 days:-5.38%; and 1 yr (252 days): -2.86%

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


Subscribe in a reader


Share/Save/Bookmark

Monday, December 6, 2004

HERE COME DA GRINCH

The media has done a great job of selling the public on a smooth and provident Election, plenty of cash in corporate coffers, Holiday and calendar seasonality, etc. -so much that we are approaching a Perfect Storm of a short term Overbought market. What a coincidence that it noticed a newly found Oil supply the same day that the Wall Street institutions (hedgers and futures traders) closed out their books for the year - causing another market booster: a $14 drop in oil price.
That said, 12 of my 15 Sentiment Indicators are at relatively extreme levels, a unanimity seldom reached - and although December is starting out a little toppy, it would be prudent to wait until a decisive Trend is in place before acting. Some of the above extremes are: the ISE sentiment ratio is at a record 299 today, just under the record 304 in January '04 shortly before the secular downtrend; the powerful but unsustainable new high list on the NYSE was 828 to 29 last week; market surveys are at high levels as is the Nova/Ursa ratio of Rydex's Bull and Bear funds. Nasdaq Volume reached 155% of NYSE, also a peak. Insider selling reached a 4-year high, although Specialists' haven't been noticably active yet ( a delayed statistic). It's probably just a Complacency Correction (with corporate and mutual fund cash high) , but - Be careful out there!

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


Subscribe in a reader


Share/Save/Bookmark