Monday, July 3, 2006


So where are we headed with this market? Most technicians seem to agree with the Bear scenario, led by the prolific data of Ned Davis. After Thursday's intense shortcovering rally of over 200 pts., we seem to be in a corrective rally - at least until some of the Sentiment Indicators dig out of their holes. According to Robert Shiller's 17-year-old survey, nearly 93% of current responders believe the market will be higher by next May - Exuberant!
Although the Investors Intelligence Bulls and Bears have become untied from last week, they are still extreme at 37 vs. 36 (the AAII is still just barely inverted at 38/39); and although Advances vs. Declines on the big board were more than 3:1, the new hi's, lows were the opposite.
Big rallies from gold, commercial metals and energy (now 28% of Fidelity's funds) from oversold levels are not producing the lead changes necessary for a new Bull market to emerge.
With the holiday approaching, both the VIX and the CBOE put/call ratio subsided substantially. Markets typically rally during this period, after the late June, post-triple-witching selloff. Finally, the Bullish Per cent has climbed up to 55 - not quite a 6% buy reversal, yet.

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