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Monday, November 28, 2005

TERM-INATOR:

At this week's Gold Conference in San Francisco, a newsletter by the Aden sisters looked back to prior double-term presidents and the effect on the Stock Market. Lyndon Johnson's second term contained the end of the 17-year cycle Bull market from 1949 to 1966 ( Harry Truman's double session was just prior to this cycle) with a 25% drop during Viet Nam; Nixon's stumble with Watergate saw the '72-'73 Bear; Reagan's Iran-Contra dustup preceded the 1987, 36% drop, while Clinton's scandal coincided with a 38% decline just before he left office. Googling the 1900s before these, only Ike, post-WWII, left office without the Bear chasing him out: Teddy R-1903; Woodrow W.-1918; Coolidge left just before 1929; and FDR had his second term decline in 1942. That's 9 out of 10 -pretty good odds against George W. for '06 or '07, also bad years for the 4-year Presidential cycle.
We'll have to see if this theory applies to Arnold the Terminator if he gets re-elected. Previous two-timers were Gray Davis, Pete Wilson and Geo.Deukmejian.
Today's negative action was foretold by a couple of extended Sentiment Indicators, at least short term: the McClellan Oscillator (ratio-adjusted) broke the 50 mark, rising to 51; the ISEE call/put ratio screamed to 295 Friday - way over the 200/bearish line. Nearing the overextended zones are the Bullish per cent - at 64, still not toppy until mid 70s. I'm still awaiting a couple more indicators due to Barron's recent delinquent delivery service.

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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Monday, November 21, 2005

GIVING THANKS:

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, et.al.
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.

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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Monday, November 14, 2005

STAYING THE COURSE:

Although we are coming off the Bearish Sentiment extremes that prompted my RALLY cry a few columns ago, we still appear to be in a rising mode as we enter the favorable months of the year for stocks, especially around Thanksgiving. Early December might be correctional as Institutions and hedge funds sell losers, take profits and avoid the 30-day wash rule (possibly buying call options a month prior to selling stocks).Still at high levels are short interest (record for Nasdaq) and Public/Specialist shorting at 4.74 and 3.77, respectively; the Panic/Euphoria Index is way low at -.69, Nova/Ursa is rising slightly at 19, and the CBOE put/call ratio is a Bullish 62, but off its Oct.14 high of 76.
Exhibiting caution are the VIX, now at a complacent 11.6, and various surveys such as Investors Intelligence at 50 Bulls/ 24.7 Bears amd the AAII Individual Investor poll at 58/23. Univ. of Mich. Confidence came in high at just under 80. And mutual fund cash is a low of 4.4%, although corporate cash stands at $2T, per Market Maven Stephanie Pomboy - this should be spent eventually in buybacks, dividends, or capital expenditures. The ratio-adjusted McClellan Oscillator is nearing a high area at 37 (75 seems to be Resistance), and the Averages/Indices (DJIA, Nasdaq, SPX) are also reaching previous toppy areas which might call for at least a stopping and reaccumulation for the Xmas rally.
That's it for now - we welcome any comments!

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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