Monday, June 22, 2015


In his epic book - The Wisdom of Crowds, James Suroweicki avers that masses of people will come up with the right solution to problems (as exhibited in the TV show where a "HELP" line was usually the best resource); however, in the Memoirs of Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay, he opines that crowds do exactly the wrong thing at the wrong time - an Contrary Opinion is the best tool for forecasting. So who is right?

Actually, both are! Depending on the timing. As local analyst Harry Domash recently stated at a Money Show talk: The Trend is your Friend until it Bends at the End! In other words, it is at extremes that surprises occur. The current Bull stock market, although not record-setting in lack of corrections or Bear markets, is quite long in the tooth. Per a recent Barron's headline - the SPX has gone 1350 days without even a 10% correction. Prior longer records were 2004-07 and 1990-97 - and we know how that ended up!

Still, there is little evidence that the end is nigh - record margin interest - much higher than the above two periods- could result in a cascading drop, similar to the 1987 "Portfolio Insurance" calamity, where selling begat more selling. Most other Sentiment Indicators are still quite average; and the AAII (Individual Investor) Bulls have dropped below 30% for almost two months- recently 20% and 25%. No complacency here, especially with all the global troubles pending. The Retail investor has been conspicuously absent during this rally from March 2009, with the exception of Index ETFs.

The Nasdaq continues to make new highs, although the Volume dropped last week in relation to the NYSE - the Naz being the more speculative vehicle - possibly due to Triple Witching of expiring options. The NYSE Volume Friday was more than the previous two days combined!!! The McClellan Summation Index - cumulative reading of the Oscillators - continued to be negative - a rara avis, and a Bullish sign historically. Finally, money is flowing out of both MMFunds and Equity mutual funds - where is it going? We should know more next week when the monthly numbers from ICI come out (see below):

Date> 6/19/2015 6/12/2015
Indices: DJIA  18015 17898
  NAZ  5117 5051
SPX  2109 2094
WklyVolume (Bshs). naz/ny…. 9.2/4.8 8.2/3.6
Specul.Ratio hi=bullish 1.92 2.28
Sentiment: put/call-CBOE  62 58
VIX>50-alltmlow=8.8 14 13.8
Advance/Dec-NYSE.. 1766/1477 1442/1801
Weekly Net: 289 -359
     Cumulative: 166146 165857
Weekly  NYSE hi/low… 237/241 212/292
New Hi's/Low's Nasdaq h/l 380/146 307/120
McClellan  Oscillator 0 -25
McClellanSum .+750/-1000 -199 -150
Newsletter Inv.Intel -Bull 45.5 47.4
Surveys-Tues Bear:-5yrs 16.5 16.5
Wed. AAII  -Bull  25.4 20.0
Bear  34.3 32.6
COT:SPX w/w large/small (net)k 7k/(51k) 6k/(28k)
COT:gold  comm.hedg long-short.000 (76k) (79k)
COT:OIL comm.hedg long-short. (330k) (325k)
US$-WSJ 85.6 86.3
CEOinsider selling 24:1 18:1
off.&bd b/s.vs. 10% holder b/s 160/35 160/50
3-box rev Bullish%-  62 61
US equity -ICI Fund Flows WeekDelay (3.9B)
MMF flows Change in $B (11.1B) (7.7B)
MargDebt- top (300M) monthly  507B APR.:
ETF:mthlyEqty/ Int'l/Bond-$B 1256/519/318 APR.:
2-yr Tsy Yield: Inflation 0.73%
TIP (ETF) Inflation 112.61 111.67

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