Monday, April 12, 2010


According to Barron's, Institutions started entering stock mutual funds about 8 weeks ago, early adopters to the retail, or individuals, who entered 3 weeks ago. The ICI group shows only a couple Billion $ in early March from individuals, then flat to negative since. With few alternatives to zero rates, it appears that the several Trillions are getting antsy for higher return, with bonds now a crowded trade.

Market breadth, measured by advance/declines and new highs vs. new lows, has been incredibly strong recently: another new all time high in my cumulative A/D and weekly NY h/l of 888 to 13. The past 6 weeks totals have been 4,673 new highs to 85 new lows!

Nearly every analyst has predicted much higher targets on the stock market - credible and otherwise. Most are based on Fundamental valuations - p/e ratios, projected earnings on an improving economy, idle money, etc. Technically there are some short term yellow flags waving wildly: CEO selling rose to 45:1; both the VIX and the Inv.Intell. Bears are near a multi-year low; the Bullish % -number of stocks on Buy signals, and Nova/Ursa funds ratios are near recent highs, signaling complacency. Even the CBOE equity put/call ratio is near a multi-year low. The past 3 times the AAII Bulls were this high resulted in 1 sideways range in March, and two sharp corrections at the first of this year.

There's nothing like a rainy Monday to call for a look into past research - a couple of interesting factoids are presented here:
  • Since 1913, according to IBD, there have been 23 Post election years;in 15 of them there were Bear markets, or shortly after, as in 1987, with the delay causing more severity. 2 of the 8 Bull markets were the go-go '90s which led to the current malaise.
  • More optimistically, of the 15 major rate hikes since 1928, only 4 have rendered negative results from first hike to last - 2 of which were in the 1974 period

Here are last week's numbers:

MktSentiment Last WeekPrev. Week 5 Yr HI 5 Yr LOW
S&P 500:119411781561683
CBOE Eq. put/call: 485196-10/0846-1/03
McClellan Osc:3-1108-100
McClellan Sum:124112211568-1514
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AAII Bull:
AAII Bear:
Nova/Ursa Mutual Funds:0.940.852.20.56
US Equity-1 week lagn/a-65Million
Money Market Flows-18B-30B

ETF equity:Monthly TotalsFeb.750BJan.731B

Baltic Dry Index:2922299111700663
Bullish %:
Insider Corporate Sellers:45:128:1108:12.4:1

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Zero (IN)Tolerance

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