Monday, November 21, 2005


Finally the stock markets have given us a decent rally, from the predictable October selloff lows. Short term we might be running out of gas as some Sentiment Indicators get somewhat extended, but not yet at extremes.
The net between weekly Advances and Declines has diminished from 1377 to 412 to 284 over the past 3 weeks, and the NYSE new lows increased. Much of that was the year-end selloff of muni and other closed-end funds for tax purposes. As I mentioned in my talk before the Investor's Daily group last week, this can afford a January-effect opportunity in the CEF arena as the sellers re-buy in January. Meanwhile you get @6% tax-free yield while you wait. Some examples of these are: BMN,NCP,VCV,MUH,
Elsewhere, Mutual fund cash is at a low 4.4%, the VIX is 11.1 and the ISEE call/put ratio is nearing a Bearish 200 mark at 181. The McClellan Oscillator is a plus 32, not yet in the toppy 50-75 range and survey Bears are receding.
Still Bullish, however, are the Panic/Euphoria Index, a master indicator found in Barrons, at -.67; Public shorts and short interest is in a high range, albeit off the extremes. As to the elephant in the room - the hedge funds - recent TSAA speaker Jim Bianco notes that of the 9,000 hedge funds investing in futures, currencies, arbitrages and long-short stocks, a great many have underperformed this year and as the investor lockup expires, may have to redeem stocks to pay them off. On the other hand, they do have cash from selling losers and covering shorted stocks.
Finally, the Bullish per cent at 61 is high, but not at the tipping point of previous turnarounds. And in the Intermediate scene we are in the best months of the markets.

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