Monday, June 19, 2006


With the cathartic volatility of quadruple-witching expirations, there appears to be a Democratic/Republican-type of polarization on whether we have bottomed or not. The choices, offered by respected veteran analysts on both sides, seem to be either much farther down to go ( in this ugly month of an ugly quarter of an ugly 4th year); or stabilize at current levels which display the DJIA at its 200-day MA, and the SPX just below, while the weak Nasdaq is well below but at longterm horizontal support.
Many Sentiment Indicators argue for the latter - building a base, although whether it's to be a re-Distribution phase or Accumulation phase is yet TBD. Firstly, the Barron's Panic/Euphoric Index hit - 0.63, a prior launching level (see Feb. and last Oct.), and the VIX climbed to a recent record of 24 before retracing down to 17.2. It is doubtful that it will return to its recent range of 11-12 of the last several months.
The I.I., or Investor's Intelligence survey of Bulls and Bears continued their converging at 38.7% and 34.4 respectively - also a recent record that is Bullish. Even the Elliotticians weigh in with an A=C correction of @550 declining points each on the Dow 30. Lowry's Report's famous 90% predominance in both directions last week also gives credence to a stoppage of bloodletting, at least temporarily (weekly New highs/lows on the NYSE were 44 vs. 458).
Although the CBOE Equity put/call ratio backed off slightly with options expiration, the ISEE call/put hit a record low of 66 -very bullish for a contrarian. Like the major indices, the McClellan Oscillator was basically unchanged from last week (after a rough ride), however the Summation, at -407, is near the October '05 low. And at 48%, the Bullish per cent of stocks on Buy signals are finally in the range of previous bottoms.
It's been a long while since we've seen such a consensus of negativity like this, so in my view, left to investors and not Nations, we should have reached at least a temporary stoppage of declines.

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