Monday, September 18, 2006


In trends, either up or down, one can usually find, among the indicators that are regressing to the mean, a few standout extremes -some more reliable than others. Notable thoughts this week are that the markets' rallies have pushed them up close to new all time highs (DJIA) or at least previous highs of last May (SPX). So what are the odds of each of the 3 options - continuing higher, levelling off, or heading back down?
The Nasdaq (weakest of the 3 main Indices) has almost reached the beginning of the Nov.'05 distribution Trading Range and is also at its 200-day MA (per IBD chart). Since Michael Santoli has revealed in Barron's that 15 of the last 18 September post-expiration (option) weeks have ended down, and the 50-year history of the 4-year Kinchin cycle is unmarred in its reliability of Fall selloffs, I would say that at least a pause here is definitely in order.
Also, a very reliable visual indicator I use, the IBD put/call Volume line on the chart page, has spiked up, usually resulting in at least a cessation of the up move.However, being a two-handed analyst, a case can be definitely made for a sideways TR occurring:
Several Sentiment Indicators are showing Bullish strength by their negativity, including Public to Specialist shorting (see grid below), short interest, which may be due to other complicated causes, but still has to be unwound; Commercial Hedgers' changes of longs was an incredible 310,000 -ten times its average change, although Large Speculators declined for the first time in weeks.
Although market surveys are regressing to neutral readings, the UBS and U of Michigan Confidence numbers are at lows, and the Smith/Barney Panic master indicator is still at a Bullish -.61, so complacency hasn't exactly set in enough for a "Septic Tank"!

Mktsentiment.blogspot 9/15/2006 4Yr.HI LOW
DJIA 11560….. ……11577……. 7286
Nasdaq 2235 2243 1114
S&P500 1325 1325 776

CBOE Equity 65 87-5/04 46-1/03
put/call ratio

VIX 11.7 44-9/02 10.3-7/05

ISEE-call/put 70 299-12/04 82-4/02

McClel Osc.(+75/-100) 12 91-5/04 (81)-5/04
McClelSum.(+750/-1000) 727 1568-6/03 (726)-5/04

Newsletter Surveys:
Inv.Intel -Bull: 45.8 62.9-12/04 35-6/06
Bear:43.2/16.1--5yrs 35.4 38.2-3/03 16-6/03

AAII-Bull/Bear 48/37.4 n/a n/a
MarketVane Bulls 68 73 24

Barron's Panic/
Euphoric Master Idx -0.61 -0.24 4/06 -0.75 11/05

Bullish%- . 57 88 -2/04 46-8/04

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