That said, several yellow caution signs appeared after the Bernanke put rally of last week that causes me to be cautious near term. Technically, it appears that a 5% correction would be possible and healthy, with the rally resuming into year end. As mentioned before, the Election year model since 1900 (an average of 28 election cycles) points to a down to flat market if the incumbent is destined to lose.
Here are my concerns: Barron's columnists Michael Santoli and Steven Sears both point to Larry McMillan's put/call ratio levels calling for a correction. Since the QE3 put option Implied Volatility (IV) is lower than it was in 2007, before the financial meltdown. A very tight inverse correlation between the SPX and equity put/call is seen in Barron's looking like last April.
For several weeks my CEO insider selling ratio has skyrocketed (over buys) as shown below - doubling w/w; in fact, CEOs leaving office is up 25%, possibly avoiding the Fiscal Cliff. Especially healthcare and financials. Both Bernanke and Draghi seem to be desperate: "whatever it takes".
Elsewhere, the NYSE new highs/lows was a huge 722/36 (more than 20:1); speculative Volume (Nasdaq over NYSE) is still high. newsletter surveys were mild, but they come out Tuesday and Wednesday - before the big Fed runup. Finally, both the Bullish % and McClellan Oscillator are flashing warning/toppy signs - even the McClellan Summation aggregate.
Here are the numbers:
| Date> | 9/14/2012 | 9/7/2012 | |
| Indices: | DJIA | 13593 | 13306 |
| NAZ | 3183 | 3136 | |
| SPX | 1465 | 1437 | |
| WklyVolume (Bshs). | |||
| NASD/NYSE | 8.6/3.6 | 6.6/2.7 | |
| Specul.Ratio hi=bullish | 2.39 | 2.44 | |
| nasd/nyse | |||
| Sentiment: | put/call-CBOE | 56 | 62 |
| VIX>50-alltmlow=8.8 | 14.5 | 14.4 | |
| Advance/Dec-NYSE.. | 2317/837 | 2445/678 | |
| Weekly Net: | 1480 | 1767 | |
| Cumulative: | 143458 | 141978 | |
| Weekly | NYSE hi/low | 722/36 | 520/58 |
| New Hi's/Low's | Nasdaq h/l | 403/81 | 293/86 |
| McClellan | Oscillator | 63 | 35 |
| McClellan Sum | .+750/-1000 | 820 | 616 |
| Newsletter | Inv.Intel -Bull:tues | 51.1 | 51 |
| Surveys | Bear:-5yrs | 25.5 | 24.5 |
| AAII -Bull :wed. | 36.5 | 33.1 | |
| Bear | 33 | 33.1 | |
| COT:Change w/w | large/small (net)k | 5/5. | (2)/3 |
| CEOinsider | selling | 78:1 | 34:1 |
| 3-box rev | Bullish%- | 79 | 74 |
| US equity -ICI | Fund Flows | 1 wk lag | (2.8B) |
| MMF flows | Change in $B | 8B | (.8B) |
| MargDebt- top (300M) | monthly | 277B | JULY: |
| ETF:Eqty/Int'l/Bond | million$$ . | 702/264/226 | JULY: |
| 2-yr Tsy Yield: Inflation | 0.26% | 0.26% | |
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