Monday, May 10, 2010


Once again (going back to 1987) the Quants were surprised by the failure of their algorithms, causing yet another hiccup in an overbought condition. Coincidentally, I have been reading the excellent book - The Quants- by Scott Patterson, which in very readable narrative style describes the '08 meltdown, so similar to last week's.

As noted here last week, there were huge extremes in breadth and sentiment indicators, and, as in 1987, there were no backstops (such as Specialists and Market Makers) in the ECNs to make orderly markets by hitting the bids.

Since the newsletter surveys come out midweek, they did not factor in the excesses of Thursday, but end-of-week stats such as the McClellan Oscillator, at -123 and a CBOE put/call ratio of 69 posited that after the weekend there might be a rally, if one dared. Although new highs still bested new lows, the A/D for the week was a stunning 150 to 3078!

Finally, the Bullish per cent dropped over 20 points on the Pt.& Fig. charts, for a Sell signal - falling to 61.

Here are the numbers:

MktSentiment Last WeekPrev. Week 5 Yr HI 5 Yr LOW
S&P 500:111011861561683
CBOE Eq. put/call: 695296-10/0846-1/03
McClellan Osc:-123-32108-123
McClellan Sum:76811331568-1514
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AAII Bull:
AAII Bear:
Nova/Ursa Mutual Funds:
US Equity-1 week lagn/a               .25B
Money Market Flows-19B-6B

ETF equity:Monthly TotalsMar.805BFeb.750B

Baltic Dry Index:3354300611700663
Bullish %:
Insider Corporate Sellers:52:1154:1?108:12.4:1

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