Monday, August 29, 2005

W(H)ITHER GOEST THOU, DOW?

As the Dog Days of Vacation come to an end on lower Volume, the DJIA finds itself bound by the same old Trading Range, bouncing off the 10,400 area (although unlike the SP500 and Nasdaq it did break the 200-day MA), even with the hurricane catastrophe. Oil prices spiked to almost $70, but settled back as Bullishness on Oil is at extreme highs, connoting at least a temporary respite, with Summer traveling ending.
Although we've had a nice Summer rally going back to April, several Sentiment Indicators are still showing an upward potential after the August decline: the CBOE put/call ratio is quite high at 65 (a combination of put buyers hedging their gains and those speculating on a downmove); the McClellan Oscillator is still in the low range of -39, and the I.I. Bears hit 25 for the first time since early June (with the AAII Bears dropping back to 31 after last week's aberration); the Rydex Nova/Ursa fund ratio fell back to April's 18 level, and Barron's new Panic/Euphoria Index fell below the -.30 line at -.42.
Lastly, the Public to Specialist shorting ratio, after screaming to new highs of over 3.6 last Spring, again broke up through the 3.0 level (per IBD), and the NYSE short interest ratio hit a 2005 new high (5.91) last seen with October's 5-year high of 6.78.
Beware the conventional wisdom (an oxymoron?) of Sept.-Oct. always being the worst 2 months of the year for the market, widely disseminated by WSJ, CNBC, et.al.

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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