Monday, January 2, 2006


What a year-end , breaking both a decade- and century-long record! The 8 of 8 Santa Claus rallies ended (although we do have the first 2 days of January to make it back); but the big loser was the 5th year of the decade, always with the Dow Jones up at least 10% since the 1880s. Actually the S&P 500 and Nasdaq were up for the year, but they weren't around then. I hope this isn't a harbinger of doom for '06, which usually isn't too hot in the 4-year Kinchin, or Presidential, cycle.
So much for small, anecdotal sampling. The NORC, or National Opinion Research Center, usually demands 1500 polling units to validate a survey, which they throw up on a Bell Curve using 2% Standard Deviations which contains 95% of the results.With last year's lack of Volatility (see the VIX) putting the Dow at the lowest year-over-year change since WWII at .61%, we might expect a Bollinger Band blowoff, up or down. Odd lot short sales are screaming to new records, way more than doubling last year's numbers. Some of these numbers have to be taken with a year-end scrambling grain of salt.Any chartist looking at the year-end massacre would expect more blood in the streets to come. And although there has been some complacency after the fall rally, a few Indicators are flashing extremely Bullish:
At Bullish extremes are the CBOE put/call ratio (61), although the ISE Exchange (Int'l Options) is simultaneously Bearishly over 200 (219); the McClellan Oscillator plunged down through the zero line, to -8 (Bearish), yet the AAII Bulls to Bears is almost dead even (Bullish) at 37 to 36; the Panic/Euphoria Index (a combination of Sentiment Indicators) is Bullish at -.60, the Public to Specialist at 5.66 is just off its highs, while the IBD short interest ratio is climbing higher to levels last seen in March of '05. Finally, the Bullish % and U. of Michigan Confidence are toppy. This dichotomy of signals could bode for high volatility or Trading Range uncertainty.

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