RECOVERY OR HIATUS?

As expected, last week's Indicators improved on their oversold extremes, but enough serious damage was done previously to warrant a cautious outlook for now. With the averages still below their 200-day MAs and horizontal support lines such as the SPX's 1163 ravaged, today's rally could be a short-covering corrective rally, rather than a new Bull market with Summer coming on.
The McClellan Oscillator rallied back from -55 to the zero line, but the Summation depth of -437 is well above a -1000 oversold level. Market letters have snapped back to semi-complacency but the Nova/Ursa ratio has slipped into the high teens - a reliable Bullish sign. Another positive sign is the Bullish per cent having worked its way down to 53.
With today's (Monday) large gains slipping away in the final hour, I would adopt a "Show Me" stance until Volume and Trend improve.

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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RECOVERY OR HIATUS?

TAXTIME:

At least part of recent market softness has to be due to last minute Income tax funding before the Friday deadline. Despite the many previously mentioned reasons for another selloff, many of the Sentiment Indicators are lining up for a decent rally in the near future. Usually, when I decide to take a vacation before my summer class starts, the market rallies bigtime - like Jesse Livermore did when the market sagged (take a cruise), that is what I plan to do next week, so the column will be a little disjointed, timewise.The Indicators that are currently on or near a Buy point are: the CBOE put/call ratio at 64, although the ISE one jumped up on last Friday's action. The VIX quieted down to 12.6; newsletter surveys are giving a huge Buy signal with I.I.'s Bull/Bear harkening back to last Aug. numbers, below 50% vs. 29.2 Bears; recent Consensus,Inc.'s 35% and AAII's 27.7 vs. 43.9 (inverted, yet) also are extreme. Plenty of cash still abounds, the public is outshorting the Specialists increasingly at 2.26 to 1, and the DJIA dividend rate is at a new high 4.7%.
I would still like to see the Bullish percent fall to about 50% of stocks on a Buy signal (now at midrange 65) and the Nova to Ursa Rydex ratio into the teens from its current 24.

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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TAXTIME:

CASH IS KING:

The two Sentiment Indicators that stand out this week are the Mutual Fund Cash (IBD's figures) at a record high 5.6%, and the AAII Bull/Bear ratio of 28 to 51; both are multi-year highs, and both are Bullish for the markets. With the 3 indices right at or above the 200-day MA and previous Support levels we are still at that CMJ (Critical Market Juncture) that tells us whether we rebound against all odds or break through back into the previous 11-month Trading Range of 9,800/10,400 DJIA.The CBOE and ISE put/call ratios are still helping the Bull case, and the Advance/Decline actually did turn around last week to the positive side, making the McClellan Oscillator bounce off its bounded low. Finally, the Public to Specialist shorting reached a high of 2.15 (5-year high is 2.57), and the odd-lot shorts rose from 7.9M to 10.8M last week - a statistic I usually haven't followed since options became available to the little guy.

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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CASH IS KING:

THREE TIMES' THE CHARM?:

As expected/hoped, for the third bi-monthly time, the DJIA has tested the 10,400 Support area after advancing there in Nov. That Wall of Worry has some pretty strong rocks to climb over, with the added threat of 1/2 point rate hike in May (per the Fed Funds Futures). As with most Contrarians, however, Ned Davis is noting that we are getting close to extreme pessimism (if the SPX can stay above 1163), and that a nice April rally should ensue. Current Earnings Warnings are higher than normal (2.3 vs 2 to 1) - another rock.
My Sentiment extremes this week include a negative New High to New Low ratio - the first since the August '04 lows which included a Selling Climax of 1:14 ratio; The McClellan Oscillator bounced off its Buy-signal low of -100 last week ending at -77, and the Summation went negative. Invest.Intell. Bears zoomed up to 27.8 a recent high of fear, and the AAII survey inverted to 23.2/41.9, Bulls to Bears. The Bullish Percent, however, advanced down another Pt.& Fig.box in its Sell column - a Buy signal is still a ways off.
Corporate cash rose to a record 14%, and some OTC stocks are announcing dividends (AMAT, LRSX, NVLS in techland) in the quest for what to do with all this money?

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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THREE TIMES' THE CHARM?:

SPECIAL UPDATE -CMJ:

Critical Market Juncture - Can this 2-week cascading market end its downswing soon, or are we destined to proceed from Aw,Shucks to Shock & Awe? Ignoring opposing media Views, as opposed to Actionable News, here's how I would read this market Technically: An extremely oversold market should rally, at least short term covering, at some point during this recent 4+% DJIA decline. A logical point would be the 10,400 large Support area, having fallen through Support Lite of 10,630, and a similar action of the S&P 500 (the Nasdaq has fallen through its line).Expecting a follow-through Wednesday morning, one way to play this opportunity ( recall Nixon's comment about the Chinese symbol for crisis was also opportunity) would be to wait for the open and watch for this test of Support, Buy protective Puts on any bounce as premiums switch from Puts to Calls, and ride the upswing like a surfer until the wave plays out. Leave the Puts in place ( they're probably toast anyway) and trade in the Calls/ long stock on weakness - then await the decision of "the They" to push this Bull farther up or follow the conventional wisdom of: a tired 3-year Bull, a seasonal ending of a Nov. to Apr. cycle, a 7th rate hike, yada,yada. See previous columns of www.mktsentiment.blogspot.com for improving Bearish (read Bullish) indicators.

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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SPECIAL UPDATE -CMJ:

THE "DOWN" JONES:

There is a "Perfect Storm" of reasons why the Bull market is over, including the 3-year cycle, the end of the seasonal Nov.-Apr. half year and Ira/Pension contribution period ending, Old highs revisited and failed in besting; valuations, China's renewed surge of output, and rising rates/ lowering dollar. And don't forget higher oil/gas which not only impacts the consumer, but the food/goods transporting costs.
However, we could be in an oversold state at the 10,600 Dow level (surely at 10,400 Support). At least so says the put/call ratios at a 70 matching Jan.21's Bullish number, and before that the October bottom at 79; the ISE call/put number is also weakening to 131 (lowest since Sept.'s 99). The ratio-adjusted McClellan Oscillator is at a near-bottoming level of -60 and the Rydex Nova/Ursa number goes back to Jan. levels. Surveys are benign, except for the AAII being dead even at 32.5 apiece for Bulls and Bears, a rarity. Even the Specialist shorting has been backing off a tad.

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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THE "DOWN" JONES:

THE IDES OF MARCH:

As we near the middle of March with last week's report of the seasonal dangers ahead, the Sentiment Indicators I follow are at best mixed: the CBOE Equity put/call ratio at 65 is the highest since the Jan.'05 liftoff rally, the Nova/Ursa ratio at 25 keeps making short term lows, and the Public/Specialist shorting at 1.86 rises with the recent high being 2.28, again at the Jan.21 liftoff. The McClellan Oscillator (ratio-adj.) is -46 this week, getting near Buy levels. Bearish signals include newsletter surveys with the I.I. spread at 55.7/21.6, and the Market Vane numbers similarly complacent. The S&P 500's Bullish percent's Pt.& Fig. chart has been on its 3-box (6%) SELL signal since it crested at yearend.

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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THE IDES OF MARCH: