THREE TIMES' THE CHARM?:

As expected/hoped, for the third bi-monthly time, the DJIA has tested the 10,400 Support area after advancing there in Nov. That Wall of Worry has some pretty strong rocks to climb over, with the added threat of 1/2 point rate hike in May (per the Fed Funds Futures). As with most Contrarians, however, Ned Davis is noting that we are getting close to extreme pessimism (if the SPX can stay above 1163), and that a nice April rally should ensue. Current Earnings Warnings are higher than normal (2.3 vs 2 to 1) - another rock.
My Sentiment extremes this week include a negative New High to New Low ratio - the first since the August '04 lows which included a Selling Climax of 1:14 ratio; The McClellan Oscillator bounced off its Buy-signal low of -100 last week ending at -77, and the Summation went negative. Invest.Intell. Bears zoomed up to 27.8 a recent high of fear, and the AAII survey inverted to 23.2/41.9, Bulls to Bears. The Bullish Percent, however, advanced down another Pt.& Fig.box in its Sell column - a Buy signal is still a ways off.
Corporate cash rose to a record 14%, and some OTC stocks are announcing dividends (AMAT, LRSX, NVLS in techland) in the quest for what to do with all this money?

SPECIAL UPDATE -CMJ:

Critical Market Juncture - Can this 2-week cascading market end its downswing soon, or are we destined to proceed from Aw,Shucks to Shock & Awe? Ignoring opposing media Views, as opposed to Actionable News, here's how I would read this market Technically: An extremely oversold market should rally, at least short term covering, at some point during this recent 4+% DJIA decline. A logical point would be the 10,400 large Support area, having fallen through Support Lite of 10,630, and a similar action of the S&P 500 (the Nasdaq has fallen through its line).Expecting a follow-through Wednesday morning, one way to play this opportunity ( recall Nixon's comment about the Chinese symbol for crisis was also opportunity) would be to wait for the open and watch for this test of Support, Buy protective Puts on any bounce as premiums switch from Puts to Calls, and ride the upswing like a surfer until the wave plays out. Leave the Puts in place ( they're probably toast anyway) and trade in the Calls/ long stock on weakness - then await the decision of "the They" to push this Bull farther up or follow the conventional wisdom of: a tired 3-year Bull, a seasonal ending of a Nov. to Apr. cycle, a 7th rate hike, yada,yada. See previous columns of www.mktsentiment.blogspot.com for improving Bearish (read Bullish) indicators.

THE "DOWN" JONES:

There is a "Perfect Storm" of reasons why the Bull market is over, including the 3-year cycle, the end of the seasonal Nov.-Apr. half year and Ira/Pension contribution period ending, Old highs revisited and failed in besting; valuations, China's renewed surge of output, and rising rates/ lowering dollar. And don't forget higher oil/gas which not only impacts the consumer, but the food/goods transporting costs.
However, we could be in an oversold state at the 10,600 Dow level (surely at 10,400 Support). At least so says the put/call ratios at a 70 matching Jan.21's Bullish number, and before that the October bottom at 79; the ISE call/put number is also weakening to 131 (lowest since Sept.'s 99). The ratio-adjusted McClellan Oscillator is at a near-bottoming level of -60 and the Rydex Nova/Ursa number goes back to Jan. levels. Surveys are benign, except for the AAII being dead even at 32.5 apiece for Bulls and Bears, a rarity. Even the Specialist shorting has been backing off a tad.

THE IDES OF MARCH:

As we near the middle of March with last week's report of the seasonal dangers ahead, the Sentiment Indicators I follow are at best mixed: the CBOE Equity put/call ratio at 65 is the highest since the Jan.'05 liftoff rally, the Nova/Ursa ratio at 25 keeps making short term lows, and the Public/Specialist shorting at 1.86 rises with the recent high being 2.28, again at the Jan.21 liftoff. The McClellan Oscillator (ratio-adj.) is -46 this week, getting near Buy levels. Bearish signals include newsletter surveys with the I.I. spread at 55.7/21.6, and the Market Vane numbers similarly complacent. The S&P 500's Bullish percent's Pt.& Fig. chart has been on its 3-box (6%) SELL signal since it crested at yearend.

HIGH THERE:

Several Indices hit 4-year highs ( the SPX has retraced 71% of its loss, while a recent - April '03 birthdate- Rydex's ETF, RSP, or equal weighted S&P 500 has hit an all time high). We might assume this Bull is getting tired, and for several good reasons: We are nearing the end of the 6-month seasonally positive cycle with IRA contributions; banging on 11,000 Dow and 2100 Nasdaq; rising oil, declining dollar, employment participation declining with layoffs up 40% year over year, and interest rates climbing. Not only that, astrologists warn of the Bearish April 8 equinox and pullbacks after March's option expiry on the 18th.
Although Barron's Michael Santoli reminds us that at the very top in March '00, the Investors' Intelligence ratio was 53/27, now the Bulls over Bears is 54/22, although that is not exceptionally high, nor are most other Sentiment gauges currently. Momentum seems to be surging with 619 new highs over 57 new lows, 2273 advances in the NYSE over 1225 declines, a nice 62 CBOE Equity put/call ratio and only a small few Indicators nearing overbought conditions: Bullish percent, Rydex Nova/Ursa and the Market Vane survey. We would stay the course and hope for Volume breakouts.