SPECIAL TREATMENT:

Occasionally, Sentiment Indicators come and they go - as Charles Gasparini of WSJ reports, the Specialist shorting may be one that goes!. He claims that around Labor Day this year, the last of the floor Specialists on the NYSE will have folded their tents, thanks to John Thain's inevitable (?) electrifying of the exchange.
Although new highs dominated new lows last week 3:1, even on the Nasdaq which doesn't consist of 50% non-common ( preferred, ETFs, etc.) stocks, the Selling Volume on Friday was huge - 2.6B on the NYSE, 3.5B on the Nasdaq.
Advance/Decline breadth, exactly 2:1 decliners, was the most issues down since late Feb., the last major selloff. Short interest is again a record at 8 days to cover on the NYSE, and IBD's number is also a new high at 7.82.
Despite the ugly week, surveys were for the most part bullish, with Inv.Intell. Bears at their lowest level since July 2004, at 18+; even the AAII reversed positions to 43:33.
Finally, corporate Insider sold at a 61 to 1 ratio, with Tech sellers 100 to 1 over buyers.
Here are the numbers:
Mktsentiment. 6/22/2007......5Yr.HI........ LOW

DJIA ………. 13360...........13668...........7286
Nasdaq………. 2588............2627.............1114
S&P500…….. 1502............1536............776
CBOE Eq. put/call ….62............87-5/04........46-1/03

VIX ………. 15.7..........44 9/02........10.0-7/05

ISEE-call/put ……. 127...........299-12/04.......58 - 3/9/07
(>200/Bearish)

McClel Osc……………-35...............91-5/04.........(81)-5/04
McClelSum…………… 248..........1568-6/03.......(726)-5/04

Newsletter Surveys:
Inv.Intel -Bull:…..…. ..53.3...........62.9-12/04......35-6/06
Bear:………… 18.9 .........38.2-3/03.......16-6/03

AAII-Bull/Bear ………43.2/33.7....n/a n/a
MarketVane Bulls…. 71......... 74..............24
IBD: Short Interest- ….7.82nh……7.82………. 4.0
Public/NYSE Spec.-…..6.59………13.15……….1.0
Birinyi Blogger
Bull/Bear Poll …………35.2/29.4
Bullish%- ……….…75...............88 -2/04...... 46-8/04
*Insider corporate sellers 61:1
Sectors: Most Buyers: Healthcare, Finance (25 sellers:1)
Most Sellers: Tech (100 sellers:1)

COGNITIVE DISSONANCE:

The above is defined as the frustration of accepting new facts that disagree with the current comfortable belief, sometimes known as Contrary Opinion. In Barron's recent Other Voices, Kevin Duffy writes about some disturbing facts on today's market:
- Strategists at the 12 major firms are in unanimous agreement for higher stocks, the first time since 2000.
- Money market balances are at all-time low (21%) of assets; the ICI reports only 3.7% cash in Equity Funds, below the 3.9% record in 1972.
- Assets in Bear funds and short ETFs vs all Mutual Funds are 1 to 1,000.
- The Finance Sector is 22% of the S&P 500 and corporate profits from financial activity is double that number.
On the other hand, Goldman Sachs reports that 18 of the S&P 500 stocks are in merger/buyout mode with $23B (almost all cash) deals at risk in Supply.
Some Sentiment extremes this week include the Bearish ISEE indicator at 173; I.I. survey complacent at 56.7 Bulls to only 21.1 Bears, although the AAII inverted to cautious.
Corporate Insider Selling dropped from a high 97:1 last week to only 24:1, with Tech sellers 320:1.
Here are the numbers:
Mktsentiment. 6/15/2007......5Yr.HI........ LOW

DJIA ………. 13639...........13668...........7286
Nasdaq………. 2627nh............2627.............1114
S&P500…….. 1533............1536............776
CBOE Equity put/call 58............87-5/04........46-1/03

VIX ………. 13.9..........44 9/02........10.0-7/05

ISEE-call/put ……. 173...........299-12/04.......58 - 3/9/07
(>200/Bearish)

McClel Osc……………13...............91-5/04.........(81)-5/04
McClelSum…………… 289..........1568-6/03.......(726)-5/04

Newsletter Surveys:
Inv.Intel -Bull:…..…. ..56.7...........62.9-12/04......35-6/06
Bear:………… 21.1 .........38.2-3/03.......16-6/03

AAII-Bull/Bear ………37.3/43.7....n/a n/a
MarketVane Bulls…. 66......... 74..............24
IBD: Short Interest- ….7.58……7.66………. 4.0
Public/NYSE Spec.-…. 7.26………13.15……….1.0
Birinyi Blogger
Bull/Bear Poll …………50/23.3
Bullish%- ……….…76...............88 -2/04...... 46-8/04
SentimentTrader
Short/longtermBULL/BEAR. N(neutral)/N

*Insider corporate sellers 24:1
Sectors: Most Buyers: Healthcare, Energy (10:1)
Most Sellers: Tech (320:1)

JUNE SWOON:

Like the man said, every time breadth goes negative while the market makes new highs, the next month is down (avg. 2%). It happened 4 times over several decades, and 4 times in May. Today, Monday, the DJIA is at 13,464 - 50% rally from last week's decline is 13,471.

However, of the last 25 months, option expiry week (or, 3 days prior to the third Friday), 21 have been UP weeks, 3 DOWN, and 1 FLAT.

The number 1 culprit for the inevitable correction wan the 10-year Treasury breaching 4.75%, which predicted all the major selloffs the past 3 years - also extreme was the % above the 200-day MA on the DJIA: previous selloff levels were 8%, 5.2%, 6.7%, and 7.4% - this time it was 10% above! The resulting bottom was from 0 to 5% BELOW the 200MA -we've only reached a +3% above, so far.

The majority of sentiment indicators did not see last week's decline coming, in fact several are now cautiously Bullish. The McClellan Oscillator, now residing at -49 after hitting -75 is very bullish, as are the put/call ratios of ISE (rare 92) and CBOE (63) . The AAII Bull/Bear is still inverted, (bearly) at 40 vs.42, as is the Birinyi bloggers poll.
Calling for more downside is the McCellan Summation, Bullish per cent, and hugely extreme - the Corporate Insider sellin, now at 100-1, mostly in tech companies.
Here are the numbers:
Mktsentiment. 6/08/2007......5Yr.HI........ LOW

DJIA ………. 13242...........13668...........7286
Nasdaq………. 2573............2613.............1114
S&P500…….. 1507............1536............776
CBOE Equity put/call 63............87-5/04........46-1/03

VIX ………. 14.8..........44 9/02........10.0-7/05

ISEE-call/put ……. 92...........299-12/04.......58 - 3/9/07
(>200/Bearish)

McClel Osc……………-49...............91-5/04.........(81)-5/04
McClelSum…………… 447..........1568-6/03.......(726)-5/04

Newsletter Surveys:
Inv.Intel -Bull:…..…. ..52.2...........62.9-12/04......35-6/06
Bear:………… 22.8 .........38.2-3/03.......16-6/03

AAII-Bull/Bear ………40.6/42.6....n/a n/a
MarketVane Bulls…. 72......... 74..............24
IBD: Short Interest- ….7.54……7.66………. 4.0
Public/NYSE Spec.-…. 7.15………13.15……….1.0
Birinyi Blogger
Bull/Bear Poll …………26.4/32.3
Bullish%- ……….…74...............88 -2/04...... 46-8/04
SentimentTrader
Short/longtermBULL/BEAR. N(neutral)/N

*Insider corporate sellers 97:1
Sectors: Most Buyers: Finance
Most Sellers: Tech

DON'T "FOLLOW" THE MARKET - LEAD IT!:

Especially at critical turning points Sentiment can help a trader define the risk in a market. Unfortunately, this doesn't seem to be one of those times. Most indicators appear to be boringly just as they were last week, in fact, even coming off those levels- with a couple exceptions: short interest, for whatever reasons - fear, hedging, speculating - is at record numbers with the IBD at 7.66; key corporate insider selling is high again at 43 to 1, with technology leading the pack by far (buyers' leader is the Finance group).
Despite the Asian selloff over the weekend, Birinyi's blogger Bulls reverted to bullish stance at 34:27 over Bears, although the AAII reversed this number to 33 Bulls vs. 45 Bears, which should be good for the market.
Breadth number appear strong, although nearly 50% of NYSE stocks are the un-common kind - preferred, ETFs, CEFunds, etc. A study of optionable stocks would be more accurate.
Finally, UBS Index of Investor Optimism jumped from 74 to 95 recently.
Here are the data:
Mktsentiment. 6/01/2007......5Yr.HI........ LOW

DJIA ………. 13668...........13668...........7286
Nasdaq………. 2613............2613.............1114
S&P500…….. 1536............1536............776
CBOE Equity put/call 61............87-5/04........46-1/03

VIX ………. 12.8..........44 9/02........10.0-7/05

ISEE-call/put ……. 119...........299-12/04.......58 - 3/9/07
(>200/Bearish)

McClel Osc……………23...............91-5/04.........(81)-5/04
McClelSum…………… 593..........1568-6/03.......(726)-5/04

Newsletter Surveys:
Inv.Intel -Bull:…..…. ..53.9...........62.9-12/04......35-6/06
Bear:………… 21.5 .........38.2-3/03.......16-6/03

AAII-Bull/Bear ………33.3/44.8....n/a n/a
MarketVane Bulls…. 72......... 74..............24
IBD: Short Interest- ….7.66nh……7.66………. 4.0
Public/NYSE Spec.-…. 6.7………13.15……….1.0
Birinyi Blogger
Bull/Bear Poll …………34.5/27.6
Bullish%- ……….…78...............88 -2/04...... 46-8/04
SentimentTrader
Short/longtermBULL/BEAR. N(neutral)/N

*Insider corporate sellers 43:1
Sectors: Most Buyers: Finance
Most Sellers: Tech