Monday, July 26, 2010


Stock market volume remains weak, especially UP volume, a danger signal. Other negative indications are Nasdaq New Highs less than Lows, and a McClellan Oscillator at a dangerous +79 from last week's strong rally.

Also on the bear side, the Insider Selling ratio has been shooting up vs. Buying - from 9:1 three weeks ago, to 32:1 the next; last week was a startling 56:1. On the plus side, the AAII Bears rose to a 45% level, vs. 32.2% Bulls - a reliable signal.

With HFT (high frequency traders) churning 70% of the NYSE volume, the public still remains out of the market on balance, although MMFs have also seen outflows - probably paying bills and other necessities.

For those of you who asked about the DITM, my Deep-In-The-Money covered call investment strategy, read on:

I still feel it is THE optimal strategy in this Trading Range market environment, and have the statistics to back it up. After real live testing of several hundred thousand $$ and 15 to 20 positions for over a year in all kinds of markets, it remains stronger than most all alternatives, plus the added benefit of a safety net up to 10%. Even with this summers 16% decline from April, almost all positions are above water.

In 2009, from its inception in May, just the CLOSED positions returned an annualized 10.77% (stocks called away prematurely returned over 18% annualized due to the early call of stocks).
Average annualized return for Q1 of 2010 was 10.6%.
Whereas hedge funds had the worst return for Q2 in a decade, per Barron's magazine.
For the first 6 months of 2010 just ended, due to a couple "plungers" -BP and UVV, which I could have handled better, DITM still barley had a positive return of 0.2% (which was 8% better than the S&P 500). And these were just the closed trades and losses - other stocks had calls rolled out in time, keeping the stock.
By laddering positions monthly one diversifies not only market risk, but enjoys monthly dividend payments.

To sum up, DITM is a great place to put a portion of one's assets, requiring little monitoring or market knowledge. Gaining 1% on short term rates becomes negative after paying taxes, a weakening dollar's buying power, and Inflation.

To learn more about this strategy, please see: http:/

MktSentiment Last WeekPrev. Week 5 Yr HI 5 Yr LOW
S&P 500:110210641561683
CBOE Eq. put/call: 566296-10/0846-1/03
McClellan Osc:797108-123
McClellan Sum:219-151568-1514
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AAII Bull:
AAII Bear:
Nova/Ursa Mutual Funds:n/an/a2.20.56
US Equity-1 week lagn/a(3.1B)
Money Market Flows(18B)(13B)

ETF equity:Monthly TotalsApr.831BMar.805B

Baltic Dry Index:1940228011700663
Bullish %:
Insider Corporate Sellers:56:132:1108:12.4:1

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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