Monday, June 21, 2010


In last week's Barron's magazine Michael Santoli's column showed a chart by Ned Davis Research, of a nesting of several cycles - I've been citing these for months now and the visualization matches the historical prediction. Years ago I did a white paper on cycles going back to 1790 (thanks to Jake Bernstein's Cycle book), which showed the 18-year double cycle Martin Pring has been warning about; with the zero year also being the worst year in the Decennial cycle over 12 decades; the 4 year cycle almost perfect since WWII, the May to November period - all show a dismal few months to come (after a brief oversold summer rally).

Couple that with a failed Santa Claus rally, a lousy January barometer, and a global economy, and my DITM (deep-in-the-money) investment strategy looks pretty good (see for more).

The sentiment indicators below do not show too much in the way of extremes, but the CEO insider selling continues to increase, while the Baltic Dry Index (proxy for the global economy) decreases weekly; money market funds gave up the most since April, the apogee of the sugar rally. And the AAII Bull/Bear ratio did a huge about face from the prior week, indicating complacency.

While breadth is stronger recently, the McClellan Oscillator is flashing a short term warning.

Here are the numbers:

MktSentiment Last WeekPrev. Week 5 Yr HI 5 Yr LOW
S&P 500:111710911561683
CBOE Eq. put/call: 636896-10/0846-1/03
McClellan Osc:5020108-123
McClellan Sum:-48-3831568-1514
Newsletter Surveys

AAII Bull:
AAII Bear:
Nova/Ursa Mutual Funds:1.20.852.20.56
US Equity-1 week lagn/a-3.7B

Money Market Flows-35B.7B

ETF equity:Monthly TotalsApr.831BMar.805B

Baltic Dry Index:2694342311700663
Bullish %:
Insider Corporate Sellers:20:117:1108:12.4:1

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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