Monday, September 19, 2011


As everyone knows by now, unemployment is at record high levels, especially for young people, and getting a job right out of college is very difficult - and the financial sector is even worse. Barron's magazine reports that a survey was done on Harvard MBAs over the past 20 years: when 30% head for Wall St. after graduation, the market invariably tanks - when only 10% do so, the market rallies. Despite today's job outlook, the percentage is 37!

Last week's 5 up days was likely a countertrend rally; from July's high, the SPX has dropped (leg A) into a Flag formation (upward trend channel, showing a possible H&S top within a greater H&S top) - if leg C down equals leg A, we can see the market drop to below 1000 by 2012 (also a Pt.& Fig. target). The global economy and political standoffs indicate this scenario.

Sentiment Indicators, however (thanks to last week's rally) seem benign: the CBOE put/call ratio is down to 69; the VIX at 31. The reliable McClellan Oscillator jumped from a minus 34 to a plus 47, indicating a short selloff (today). On the positive front, the Investors Intelligence Bull/Bear ratio has joined the AAII one in being inverted, which is contrarily Bullish; and the Commitment of Traders shows the small trader finally getting Bearish on Sept.2, possibly late to the party.

Despite the weekly rally, New Lows bested New Highs 5:1 in the NYSE and NASD, not a broad rally. CEO Insider trading is still low on the selling side, and money flew out of MMFs, but not into stocks.

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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