Monday, May 16, 2005


Fear of Friday the thirteenth was indeed warranted, at least for the large cap stocks last week. On the contrary, the recent stepchild Nasdaq held up quite well as techs started to breathe life again. Even though several Sentiment Indicators remain (Bullishly) pessimistic, such as aforementioned put/calls, Nova/Ursa, public shorts vs. Specialists, other signs keep the Orange caution light on: all 3 major Indexes are below their 200-day MA, and have slipped into the old, lower Trading Range - 10,400 to 9,700 on the DJIA.
The first quarter of '05 saw record stock Buybacks, which is a market-topping signal; Hedge Funds, which have increased assets to $1T (10-fold since 1994), got whipsawed by Kerkorian's Buy-in and S&P's bond downgrade. Being on the wrong side of both occurrences, we could see another LTCM reaction from some 20-something genii running money by algorithm. New highs on the dollar and a flattening yield curve negating carry-trades aren't exactly helping these poor unfortunates. The Dow 30 dividend yield broke 5% this week and the U. of Michigan Confidence survey hit another new low at 85.3, giving hope of a Summer rally.

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: 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 Zero (IN)Tolerance

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