THE WISDOM OF CROWDS:

The essence of Contrary Opinion is to go against the Conventional Wisdom, or majority - at least at the extremes, because of people's herdlike mentality and reliance on "experts" to influence them. But James Suroweicki, in his book the Wisdom of Crowds maintains that the experts also are victims of overconfidence in their opinions and are influenced by their peers. Studies show that congresses, juries, et.al. make decisions based on the loudest and strongest voice, whereas TV programs such as Millionaire rely on thousands of disparate opinions (Lifeline) to get more accurate answers. Which brings us to Intrade.com , the Irish betting company where, like open outcry markets, traders put money on their opinions. A few weeks ago they set high records on the odds of a Recession in '08, which was Bullish for the market in contrary fashion. Now, however, it is setting new lows betting that we may avoid one - this may indicate the market could trend lower before it rallies again to new highs.
Other extremes on the south side included a complacent VIX reading of 16.5, a recent low; the McClellan Oscillator and Summation Index are "nearing" usual high areas, as is the Bullish per cent index. Nasdaq to NYSE Volume was almost to a record high at 179, and money market cash flowed in at $23B versus a record outflow the week before at minus $78B.
Insider selling remains relatively high and short interest (IBD's ratio) is at a record high of 13.4.
On the plus side breadth is strong (although Volume remains weak), and sideline money is the 3rd greatest since the '87 and '03 rallies.

MktSentiment. 5/16/2008 Last Week..... .5Yr.HI...... LOW

DJIA ………. 12986………..12745………..14093............7286
Nasdaq………. 2528………….2445…………2810.............1114
S&P500…….. 1425………….1388…………1561………..776
CBOE Eq. put/call …61…………….64……………..92-1/08…..........46-1/03

VIX ………. 16.5…………..19.4…….…….44.. 9/02 bu........10.0-7/05 br
Intrade.com-
Recession% 35……………28…………..76(bullish)….28(bearish)
McClellan Osc………36…………..22……………91-5/04 br......(-81)-5/04bu
McClelSum………426…………….304…………..1568-6/03.......-917

Newsletter Surveys:
Inv.Intel -Bull:…..…46……………44.4……….…12/04br......35-6/06bu
Bear:………… 29.9…………32.3………… 38.2-3/03.......16-6/03

AAII-Bull/Bear ……45.2/29.7…….52.8/24.7……..n/a n/a
MarketVane Bulls…53……………55…………. 74br..............24bu
IBD: Short Interest- 13.4nh………13nh…………13.4………. 4.0
Public/NYSE Spec.-…11.3…………11.4…….21bl…………..1.0br
Birinyi Blogger
Bull/Bear Poll ………36/45…… 36/45
Bullish%- …………62…………56…….…88 -2/04br.....19bu
*Insider corporate sellers.20:1…..20:1………..97…………..5
Sectors: Most Buyers: Finance
Most Sellers: Technology

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THE WISDOM OF CROWDS: