Monday, November 1, 2010


About the only thing we haven't heard from the media prior to Election Day is what to call the TEA Party: we have the Elephants and Asses, but no mascot yet for Taxed Enough Already, or Independents. As Autumn Leaves (and Winter Arrives), still no answer on the previous tax breaks due to expire. Much has been discussed - CNBC aptly named the possibility of taxing church property "APPRAISE THE LORD !". So far this young Century Congress has changed the tax structure 6 times - a headache for estate planners and tax preparers.

Although I've always thought that the stock market should be a non-"prophet" organization, technicians know we can learn from history: Pre-election years, per Ned Davis Research, have averaged 17.6% over several decades (think 2011); while a distant second is Election year at +9.5%. The best months also lie ahead - November, December and January. NDR also cites years where capital gains are hiked only rise 6.1%, vs a normal 8% (19.5% when CG are cut). Best market gains also occur with a Democratic President and Republican Congress (9.6%).

That said, some alarming Sentiment statistics occurred this past week: the AAII Bears % was the lowest since December 15 of 2006 at 20.6%, although the major top did not occur until Oct.'07 -10 months later. Previous low was 19.1% in January '06 at 19.1%, only 4 months before a minor correction. And the Bulls breached the 50% mark as well.

Another startling fact was Insider (CEO) Selling, reaching an almost record high of 104:1 over Buying, up from 28:1 the week before. Then I realized that the record of 108:1 occurred in April '09, at the beginning of the 1,000 points of "light" in the stock market - who says corporate insiders know what their companies are doing?

Here are the numbers:

MktSentiment Last WeekPrev. Week 5 Yr HI 5 Yr LOW
S&P 500:118311831561683
CBOE Eq. put/call: 616796-10/0846-1/03
McClellan Osc:(14)(1)108(123)
McClellan Sum:8599231568(1514)
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AAII Bull:
AAII Bear:
US Equity-1 week lagn/a(.2B)
Money Market Flows(24.6B)(17.0B)

Baltic Dry Index:2678272011700663
Bullish %:
Insider Corporate Sellers:104:128:1108:12.4:1

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