CYCLE "FOUR"CAST:

According to both JP Morgan data and Ned Davis Research, the Pre-election year of the 4-year election cycle is the best for stocks - in fact, it is better than the the other 3 years combined from 1940-2008! Going according to  plan, the 4th Q of the previous year (just past) was the best of all quarters, and the new quarter ahead should be the best of the 4 this year, followed by the 2nd Q. 
That said, short term conditions -despite Monday's great start - still look to caution based on previously mentioned Sentiment extremes: the AAII Bulls coming off a 63% reading (Bears off 16%); the SPX stretched above its 200-day moving avg.; a low 2% dividend yield and a 16 VIX recent reading. Longer term, margin debt continues to increase to $270B.
For the first time since last Spring, equity mutual funds showed INFLOWS.
  Here are the numbers:

DJIA:	11577	11573	14093	6626
Nasdaq:	2652	2665	2805	1114
S&P 500:	1257	1256	1561	683
CBOE Eq. put/call:	58	53	96-10/08	46-1/03
VIX:	17.8	16.5	90	8.8
McClellan Osc:	14	15	108	(123)
McClellan Sum:	538	463	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	55.6	58.8	63	22.21
InvestorsIntel.Bear:	20.0	20.6	54.4	16
AAII Bull:	51.6	63.3	n/a	n/a
AAII Bear:	20.1	16.4	n/a	n/a
US Equity-1 week lag	n/a	.3B
Money Market Flows	22.4B	(9.3B)
Baltic Dry Index:	1999	1999	11700	663
Bullish %:	854	84	88	2
Insider Corporate Sellers:	14:1	28:1	108:1	2.4:1

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: brentleonard.com 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 Amazon.com: Zero (IN)Tolerance

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CYCLE "FOUR"CAST:

HOLIDAY ISSUE:

After a positive week heading into the Christmas holiday, not much changed with the exception of these extremes: The AAII ratio of Bulls to Bears jumped mightily with Bulls advancing from 50 to a heady 63%, and the Bears all the way down to 16 from 27%. The other extreme remains the Bullish per cent at a near record 84% of stocks on a BUY signal. Money continues to flow from domestic stock funds, but also MMFs. Possibly buying gold or ETFs. Insider selling jumped higher week over week, even with the 2-year tax cut extension.

This week is the actual Santa Claus rally time, so we shall see if it holds true, with a weak start.

Here are the numbers:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11573	11491	14093	6626
Nasdaq:	2665	2642	2805	1114
S&P 500:	1256	1243	1561	683
CBOE Eq. put/call:	53	50	96-10/08	46-1/03
VIX:	16.5	16.1	90	8.8
McClellan Osc:	15	1	108	(123)
McClellan Sum:	463	411	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	58.8	56.8	63	22.21
InvestorsIntel.Bear:	20.6	20.5	54.4	16
AAII Bull:	63.3	50.2	n/a	n/a
AAII Bear:	16.4	27.1	n/a	n/a
US Equity-1 week lag	n/a	(2.4B)
Money Market Flows	(9.3B)	(33.2B)
Baltic Dry Index:	1999	2000	11700	663
Bullish %:	84	84	88	2
Insider Corporate Sellers:	28:1	19:1	108:1	2.4:1

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: brentleonard.com 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 Amazon.com: Zero (IN)Tolerance

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HOLIDAY ISSUE:

(SENTI)-BREADTH-MENT:

Moving into the quiet Holiday period, and hopefully a Santa Claus Rally (bet. Xmas and New Year's) only a couple things stand out:
Volume was high last options expiry week, but the Nasdaq divided by NYSE ratio was low (Bearish); also Bearish FOR the market was the toppy Bullish %, at 84, now near its multi-year high of 88. Domestic Equity mutual fund flows swung dramatically last week (year-end adjusting) from $25B inflows to $33B outflows; as for the Sentiment side, Investor Intelligence Bulls crept even higher, above 50%.

For readers who have followed my recent DITM (deep-in-the-money covered call option strategy), they can do so at http://ditmcalls.blogspot.com and read about my recent trade earning an ANNUALIZED 21.4% on Mattel. It's a new variation on a theme capturing annual dividends with the calls, rather than quarterly.

Here are the numbers for last week - Happy Holidays to all:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11491	11410	14093	6626
Nasdaq:	2642	2637	2805	1114
S&P 500:	1243	1240	1561	683
CBOE Eq. put/call:	50	46	96-10/08	46-1/03
VIX:	16.1	17.6	90	8.8
McClellan Osc:	1	9	108	(123)
McClellan Sum:	411	436	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	56.8	56.2	63	22.21
InvestorsIntel.Bear:	20.5	21.3	54.4	16
AAII Bull:	50.2	53.0	n/a	n/a
AAII Bear:	27.1	22.6	n/a	n/a
US Equity-1 week lag	n/a	(2.7B)
Money Market Flows	(33.2B)	25.3B
Baltic Dry Index:	2000	2111	11700	663
Bullish %:	84	82	88	2
Insider Corporate Sellers:	19:1	38:1	108:1	2.4:1

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: brentleonard.com 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 Amazon.com: Zero (IN)Tolerance

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(SENTI)-BREADTH-MENT:

ORANGE ALERT - CAUTION!!!:

After summing up a decade of this column's Weekly Sentiment Indicators, the strongest ones decided to show off their strength last week by exhibiting the most Bearish (FOR the market, not ON the market) in years. As reported elsewhere (AAII newsletter, Barron's) the surveys were at exaggerated extremes; the CBOE put/call ratio and VIX both slid to recent lows (complacency); even CEO Insider Selling has been huge, although that is almost a contrary indicator, judging from 3 or 4 recent periods. The new Nasdaq/NYSE Volume ratio even went low, showing a non-speculative feeling, even as the market surges on with unanimous crowd support and historic yearend bullishness.
Here are the numbers for last week:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11410	11382	14093	6626
Nasdaq:	2637	2591	2805	1114
S&P 500:	1240	1224	1561	683
CBOE Eq. put/call:	46	53	96-10/08	46-1/03
VIX:	17.6	18.0	90	8.8
McClellan Osc:	9	14	108	(123)
McClellan Sum:	436	421	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	56.2	55.4	63	22.21
InvestorsIntel.Bear:	21.3	21.8	54.4	16
AAII Bull:	53.0	49.7	n/a	n/a
AAII Bear:	22.6	26.2	n/a	n/a
US Equity-1 week lag	n/a	(1.8B)
Money Market Flows	25.3B	(3.2B)
Baltic Dry Index:	2111	2096	11700	663
Bullish %:	82	79	88	2
Insider Corporate Sellers:	38:1	34:1	108:1	2.4:1

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: brentleonard.com 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 Amazon.com: Zero (IN)Tolerance

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ORANGE ALERT - CAUTION!!!:

DECEMBER RALLY?:

December is usually a good month for the market and it seems that this year may be no exception; however, several Sentiment Indicators are flashing at least corrective warnings: the Bullish % is closing in on record highs, the market surveys are too complacent, and the coincident VIX is lying in a low range.

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11382	11092	14093	6626
Nasdaq:	2591	2534	2805	1114
S&P 500:	1224	1189	1561	683
CBOE Eq. put/call:	53	61	96-10/08	46-1/03
VIX:	18.0	22.2	90	8.8
McClellan Osc:	14	(29)	108	(123)
McClellan Sum:	421	501	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	55.4	55.7	63	22.21
InvestorsIntel.Bear:	21.8	21.6	54.4	16
AAII Bull:	49.7	47.4	n/a	n/a
AAII Bear:	26.2	24.7	n/a	n/a
US Equity-1 week lag	n/a	(2.6B)
Money Market Flows	(3.2B)	15.4B
Baltic Dry Index:	2096	2170	11700	663
Bullish %:	79	77	88	2
Insider Corporate Sellers:	34:1	55:1	108:1	2.4:1

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: brentleonard.com 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 Amazon.com: Zero (IN)Tolerance

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DECEMBER RALLY?:

MARKET TOPS:

A couple of anecdotal market topping Indicators surfaced last week, too vague to be useful, however: the first was the higher incidence of large IPOs occurring at market tops over the past 10 years (e.g. GM). The other was the percentage of Harvard MBAs that migrated to Wall St after graduating - 30% was the previous top - now at 32%.

In the upcoming TSAA Review, of which I am the Editor, I am writing a piece on success, or lack of, market top Indicators over the past 3 years. During that time there were 7 reversals, tops and bottoms. The Review will contain the whole study, and will be sent out to members, with the TSAASF.ORG site carrying it at a later time.

The CBOE Equity put/call ratio was one of the most consistent, with the highs (fear-based occurring at bottoms) ranging from mid-60s to mid-90s; Lows were mid-40s to mid-60s on a weekly basis.

Another Indicator  with much success was the McClellan Oscillator (adjusted), which was mostly negative before oversold bottoms - higher at tops. Also among the best forecasters were the two surveys that I follow: Investors' Intelligence and AAII Bull/Bear ratios. These were especially effective when inverted (more Bears than Bulls).

Last but not least was the Bullish % -stocks on a Buy signal- which designated overbought and oversold conditions quite well.

Here are last week's numbers:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11092	11203	14093	6626
Nasdaq:	2534	2518	2805	1114
S&P 500:	1189	1199	1561	683
CBOE Eq. put/call:	61	59	96-10/08	46-1/03
VIX:	22.2	18.0	90	8.8
McClellan Osc:	(29)	(20)	108	(123)
McClellan Sum:	501	608	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	55.7	56.2	63	22.21
InvestorsIntel.Bear:	21.6	20.2	54.4	16
AAII Bull:	47.4	40.0	n/a	n/a
AAII Bear:	24.7	32.5	n/a	n/a
US Equity-1 week lag	n/a	(2.8B)
Money Market Flows	15.4B	(4.1B)
Baltic Dry Index:	2170	2164	11700	663
Bullish %:	77	76	88	2
Insider Corporate Sellers:	55:1	34:1	108:1	2.4:1

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: brentleonard.com 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 Amazon.com: Zero (IN)Tolerance

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MARKET TOPS:

CAPITALISM OR CAPITOL-ISM?:

GM (Government Motors) may have been the Evil of Two Lessers, and was a partial success, especially to Warren Buffet who praised it and the UAW who benefited more than bond and stock holders. In his classic book - Against The Gods -  the late Peter Bernstein posits that while geniuses were prevalent before the end of the Middle Ages (Euclid, Da Vinci, et.al), neither the Hindus and Arabs, who gave us our numbering system discovered Capitalism, or the use of Risk and Probabilities in society. Thanks to Leonardo Fibonacci (nee Pisano) and later Pascal and Fermat, civilization started using them, with the help of the printing press, resulting in exponential advances. The main reason  was that earlier societies were comfortable with the status quo, and reliance on their gods for Fate and Risk - much like cradle to grave governing has a tendency to do these days.

Like all things organic (humans, vegetation, corporations, governments, and societies) unless modified, the growth cycle and aging eventually result in destruction - death, bankruptcies, revolutions.

Although last week's volatility did not show up in the final unchanged market levels, there was not much change in the Sentiment Indicators. Standouts include AAII Bulls dropping from a high 57.6% to only 40 - the Investors' Intelligence Bulls, however, increased from 48 to 56, while their Bears dropped to a low 20%; Insider Selling dropped to still a high 34:1.

Here are the numbers:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11203	11192	14093	6626
Nasdaq:	2518	2518	2805	1114
S&P 500:	1199	1199	1561	683
CBOE Eq. put/call:	59	57	96-10/08	46-1/03
VIX:	18.0	20.6	90	8.8
McClellan Osc:	(20)	(54)	108	(123)
McClellan Sum:	608	868	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	56.2	48.4	63	22.21
InvestorsIntel.Bear:	20.2	23.1	54.4	16
AAII Bull:	40.0	57.6	n/a	n/a
AAII Bear:	32.5	28.5	n/a	n/a
US Equity-1 week lag	n/a	(.7B)
Money Market Flows	(4.1B)	2.2B
Baltic Dry Index:	2164	24540	11700	663
Bullish %:	76	77	88	2
Insider Corporate Sellers:	34:1	79:1	108:1	2.4:1

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: brentleonard.com 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 Amazon.com: Zero (IN)Tolerance

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CAPITALISM OR CAPITOL-ISM?: