TO THE RIGHT SHOULDER - MARCH!:

As I tell students and other advice-seekers, don't be premature in calling topping or bottoming formations. However, most indications are pointing to a H&S top IF we break the horizontal neckline and Volume confirms it at each stage.
Last week's mostly up market eased any signs of Fear or Hope ( I like Hope better than Greed): the VIX and put/call ratios backed off from positive; the McClellan Osc. actually went up through the zero line (Bullish) with th Sum. seeming to bottom out -ST- at minus 290. NYSE new hi's/lows were ugly for the week at 61:341, better than a 1:5 ratio. Also pointing upward are the extremely low Nova/Ursa fund numbers and the AAII inversion of Bears (45) over Bulls (33), althought he II (Investor's Intelligence) and Market Vane are at midrange normal.
On their way to Bullish are both the master index from Smith/Barney, called the Panic/Euphoria, as well as the Bullish per cent -now at a low 54, but not at a support level yet.
Today's (Monday) big selloff - 150 pts. - was on extremely light, post-holiday Volume, with the end of the month ahead, where funds, futures traders and other big money players square their accounts.

BEAR WITH ME:

For most of the 20th Century, May was one of the worst months for stocks, hence the saying "Sell in May and go away". Toward the end of it, in the long Bull market, May became one of the best months. Once again the tectonic plate of semi-annual, seasonal stock behavior seems to reinforce the May 1 to October 31 period as grossly inferior to its complement.
With extended Bull markets, Intermediate and Long Term, both beginning in Octobers, interest rate hikes and concomitant housing slowdowns, oil and other commodity prices reaching records, it was no surprise that the top had to be put in.
Although with Friday's option expiry, usually a volatile time, we did seem to put in a surcease of downside action at various 200-MAs, horizontal and other support levels, we may stil not be through wringing out the excesses that liquidity has produced.
Temporary positive signs include a higher public/NYSE Specialist ratio, a VIX of 17 (20 as of Monday) reminiscent of and exceeding last October's high, and a recent record reading of the CBOE put/call ratio of 71.
Even though the newsletter surveys do not encompass the entire week, the AAII was giving a rare inverted reading with Bears at 43.6 besting the Bulls at 39.4%.The McClellan Oscillator, ratio-adjusted, plunged through the -50 line, a usual support area recently, ending the week right on it, after descending almost to -75; the Summation Index broke down through the zero line, usually a negative sign, but has not begun to mount a cruise-ship turnaround yet. And the SharpChart's Bullish Per Cent of S&P 500 Pt.& Fig. chart is at 56, not near a bottom - after having given a prescient 3-box, 6% Sell signal days ago.
Enigmatically, the Rydex Nova/Ursa investors have their eyes on a different ball, throwing more money into the funds with a low, Bullish ratio of 11. Overall, AMG reports the first Outflows of Equities in many months, after the first quarter totalling over 1/2 of the 2005 Inflows. With commodities also in the dumpster, only the Dollar and Bonds seem to be temporarily oversold and rising.

BEAR WITH ME!:

So what are the Sentiment Indicators telling us about what happened last week? In a word - mixed, or rather not definitive as to whether there is more downside to go - which we certainly are overdue for- or whether the liquidity will keep driving the markets to new highs.
Both the "Sell in May and go away" and the Kinchen 4-year cycle argue for a sizable correction sometime in the next few weeks; despite the multi-month Bull runup, both NYSE and Naz new highs ran 2:1 last week, even with the selloff before the weekend.
And mutual fund inflows were still strong, per AMG data.
As for the indicators, the Panic/Euphoria has immersed back down under water to a neutral -.41 (out of the complacency area); the CBOE put/call ratio rose 10 points to 65 signalling worry about the near term. The McClellan Oscillator is giving an actual BUY signal by being right at the -50 level, and the Rydex Nova to Ursa ratio slipped another point to 14.
Survey newsletters remained mildly Bullish, although the Market Vane Bulls are at a high of 71. The other important sign that we could still have farther down to go is the Bullish Per Cent, which broke its 6% (or 3-boxes of 2-pt. boxes) descent stop of stocks on Buy signals.
Other technical warnings are most indices breaking the 50-day MA, and 5-year highs on margin debt (remember 2001?).

OFF AND RUNNING:

Occasionally I add a meaningful Sentiment Indicator that appears, after
tracking it for awhile. This week I am deleting an IBD important one
because of its unreliability and tardiness. Their Mutual Fund Cash has
suddenly been revised from 4-5%, down into the 3s, and backdated into '04.
There are several ways of measuring this and IBD's has never matched any
others I've seen, but was OK as long as it was consistent. AMG's website
only has Mutual Fund Cash FLOW, not levels.
Elsewhere, Friday's big week-ending runup gave a shot in the arm for
markets and sectors, but not to an overbought level, Sentimentally speaking.
Rich mid-East oilionaires are buying Real Estate, companies and global
stocks with their profits.Volatility is low and Sentiment is quite
neutral, if not Bullish. I.I. (Investor's Intelligence) Bears are high at
28.6, and AAII is at 33.6%. Nova Bulls to Ursa Bears are at recent lows
of 15, and all else is copacetic.
So when is this Presidential cycle low going to kick in?

GO AWAY IN MAY?:

Barron's Big Money Poll shows their money managers are anything but Bearish on the market outlook for the year. Last year at this time the Dow 30 was at 10,000. Now, year over year polling show that 57% are Bullish vs. 47% last year (when the Dow was 14% lower), 20% are Very Bullish vs. only 6%, and Bears number only 12% vs. 26% last year - Contrary Opinion anyone?
Although New Highs still outnumber New Lows 2:1, the cumulative A/D breadth is diverging from the upward trend of the DJIA. The McClellan Oscillator, in fact, has dropped from a toppy high of 734 in early February of this year, to a 136 last week, still above the zero line.The Oscillator remains at -2.
Although the Indices and VIX showed benign volatility, some major shifts in the end-of-month trading exhibited profit taking by hedge funds, et.al. Consumer Goods and Financials (at least banks) took over leadership from Basic Materials, Energy, and Industrials, at least temporarily.Despite rising rates, global reallocation of currencies has finally weakened the dollar, which is good for gold.
Stock Chart's Bullish Per Cent is just above 64, hanging on the lowest of 3-boxes delineating a downside reversal (3-boxes of 2 pt.boxes, or a 6% "material" stop). Poles apart are the complacent Bulls in the Smith Barney Panic/Euphoric Index and the Rydex Nova/Ursa ratio which at 16 is now as low as in October '05 (10% ago). Somebody's wrong!