Monday, October 31, 2005


Sometimes, with the aid of cycles, seasonality and sentiment, the market action can be totally predictable. Although September did not follow the pattern of down months, October did contain the typical year-end selling by mutual funds and profit taking by institutions, and hopefully, the seasonal low. Also typical is the last day and first 4 days of the months, especially Oct./Nov., which we are now seeing. With December and January the best months of the year for the market, we can only hope this will continue.
Sentiment-wise there are some hopeful signs: Odd-lot shorting is at record highs, 4 times the number year over year; and Nasdaq short interest is also at record levels, with Public/Specialist close behind. Barron's Panic Index is at a low -0.73.One of the most reliable of Indicators, the AAII Survey, has once again inverted with 46% Bearish and 32% Bullish.
The McClellan Oscillator is pushing up thru the zero line and the Summation has gone lower to -585, a support area. Finally, the CBOE put/call ratio, although off its last week highs, is still Bullish at 60, with the ISEE at low 125.
Possible negatives for the market are the mutual fund cash level, a low of 4.4% per IBD, and, of course, the usual Fundamental suspects of higher rates and oil prices, tired Bull market and economy, blah, blah, blah.

Personal note: I have been asked to again teach an online Technical Market Analysis course at Golden Gate University this Spring semester, and will give a talk on Sentiment at November's Investor's Business Daily monthly meeting, which will be in the 16th - which is the 3rd Wednesday - due to Thanksgiving occurring in the 4th week. It is Schwab headquarters on Montgomery St. at 7 p.m. for those interested.

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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