HNY! AND MANY HAPPY RETURNS FOR '05:

As I update my many Sentiment Indicators this Monday after Christmas weekend, most of which are extremely overcooked, I watch the DJIA slip from +20 to -20, and wonder how many hours/days are left in this ballistic rally before a correction of some type.
CBOE Equity put/call:
58VIX: recent record of complacency at 11.2
ISEE electronic exchange: back to a high of 227 a/o Friday (today's is 337!)
A/D ratio screaming with the McClellan Summation overbought
New Highs to Lows: 25 to 1
Market surveys, U of M and UBS numbers at highs in Bullish confidence
Nasdaq Volume to NYSE: 150
Bullish %: 78, the 3rd highest level in years
Finally, Specialists' shorting (late figures) rising steadily

As helpful as many Sentiment Indicators are, one of the problems with them, aside from their inexactness, is which are heuristic myths perpetuated by the media due to a small sampling, and which indeed are seasonal or cyclical events. For example, since the DJIA started before 1900 there has never been a down 5th year, in fact major rallies have occurred in every one. And though the average year was up 26%, the odds of this year hitting exactly 26% are way low. Even with small sampling, a 100% accuracy has to be at least considered with other analysis. Other larger samplings of calendar data include: over 50 years, only 5 January effects have not held up - where January's market action dictates the whole year; over 60 years December has been the best up month at +1.8% AVERAGE; over the past 30 years the last week of the year has AVERAGED +1%; the AVERAGE Bull market lasts 2.6 years, and we have gone 2.2 years since August 2002.

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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HNY! AND MANY HAPPY RETURNS FOR '05:

HOPES AND FEARS FOR ALL THE YEARS

I've always maintained that the market phrase "Fear and Greed" should be "Fear and Hope" encompassing a wider range of investors. The latest Contrarian hope is that the Dollar is about to rally after its steep decline. A Barron's article posits a 5% Bullish stance on it, although it may retest the low in a late January shakeout. Another seasonal anomaly should be revealed this Thursday as Tom Herschfeld will appear as guest on the Nightly Business Report and tout his Closed-End Fund theory about a selloff at year-end, only to rise sharply in the opening weeks of '05. Muni and Gov't Bond funds are examples: NCP,NCA,MUC, et.al. Barron's Abelson also reports 6 corporate Directors Selling for each one Buying, an often extreme market negative. Longer term, Schwab's Ken Tower reminds us that we are 561 days into a secular Bull market which averages @800 days (mid-November of '05).
More accurate, I've found over 4 years, is the Rydex Nova (bullish) fund vs. Ursa (bearish) ratio which is now quite high at 41. Like most Sentiment Indicators and Technical Oscillators it reflects a majority trend in which the public is correct UNTIL the turning point, so it serves more as a Yellow light. Although the recent Trading Range has quieted down some Indicators, others remain near Bullish extremes (bearish): the VIX at a low 11.95; Investor's Intelligence Bullish % at 62.1 - Bearish at 21.1; Market Vane Bears at 19.2 and Chartcraft's Bullish per cent at a toppy 76. HAPPY HOLIDAYS!

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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HOPES AND FEARS FOR ALL THE YEARS

ADD - AMERICA'S DEFICIT DISORDER:

Even with a record high deficit number sure to slow the Economy, a 5th Fed rate hike, 21 IPOs this week, and a quarterly Quad Witching expiration where institutional traders usually reframe their future positions, Sentiment Indicators still show much complacency. Although a few came off their extreme highs of last week, such as the Nova/Ursa ratio, new highs and advance/declines, NAZ to NYSE Volume ratio - others remain high.Both put/call ratios - CBOE Equity and ISE are extreme (62 Bulls and 259 c/p) Burke's I.I. survey shows Bulls at 60.8%/ Bears at 21.7% and the Bullish percent near its topping point.Previously mentioned Welles Wilder Delta Phenomenon, which forecasts 6 cyclical turning points every 4 years, indicates an upturn @ Dec.15 which tops out mid-April, much like the accepted wisdom of up Dec./Jans and 5th decile year bullishness. Going against that, however, is the 5th rate hike average history of Steve Leuthold, who cites:
7 days: -1.44%; 22 days: -1.12%; 126 days:-5.38%; and 1 yr (252 days): -2.86%

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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ADD - AMERICA'S DEFICIT DISORDER:

HERE COME DA GRINCH

The media has done a great job of selling the public on a smooth and provident Election, plenty of cash in corporate coffers, Holiday and calendar seasonality, etc. -so much that we are approaching a Perfect Storm of a short term Overbought market. What a coincidence that it noticed a newly found Oil supply the same day that the Wall Street institutions (hedgers and futures traders) closed out their books for the year - causing another market booster: a $14 drop in oil price.
That said, 12 of my 15 Sentiment Indicators are at relatively extreme levels, a unanimity seldom reached - and although December is starting out a little toppy, it would be prudent to wait until a decisive Trend is in place before acting. Some of the above extremes are: the ISE sentiment ratio is at a record 299 today, just under the record 304 in January '04 shortly before the secular downtrend; the powerful but unsustainable new high list on the NYSE was 828 to 29 last week; market surveys are at high levels as is the Nova/Ursa ratio of Rydex's Bull and Bear funds. Nasdaq Volume reached 155% of NYSE, also a peak. Insider selling reached a 4-year high, although Specialists' haven't been noticably active yet ( a delayed statistic). It's probably just a Complacency Correction (with corporate and mutual fund cash high) , but - Be careful out there!

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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HERE COME DA GRINCH

THE HERD SHOT 'ROUND THE WORLD:

Contrary Opinion - Today's 100-point loss on the DJIA (probably short-term, year-end profit-taking) is the result of the Overbought state of the Fall runup as reflected in many of our Sentiment Indicators. The most egregious is the ISE Call/Put extreme of 2.25, as well as relatively high levels of the CBOE Equity put/call ratio, the Investor's Intelligence survey of 57% Bulls, and the toppy level of the Bullish percent chart (number of stocks on a Buy signal). That said, there are some Intermediate Term reasons for a continued rally around year-end, if we can analyze them one by one, separating the heuristics from the rational ones: Microsoft's $3 dividend on Dec.2 will be reinvested by Institutions back into other stocks (@$34B). There are lots of losses from this years ho-hum market to be bought in for the Santa Claus/January Effect cycle; M2, corporate cash, and other measures show lots of liquidity although profits and the Economy doesn't forecast too strongly. The Dow's dividend yield is approaching a multi-year high of $4, and Specialist shorting is quiescent. One of the most reliable of sentiment indicators - the Rydex Fynd's Nova versus Ursa ratio (calling 19 of 20 market turns since 2000) is well off its lows at 39, but just as with other Indicators, the levels are only signs of warnings that are not to be acted upon until they have reversed meaningfully. And don't forget the perfect record provided by the 5th year of the Decennial Cycle (11 samples).

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 HERD SHOT 'ROUND THE WORLD:

BREAKIN' OUT IS HARD TO DO:

In a Wyckoffian upthrust through the Resistance-becomes-Support level @10,500 DJIA that has harnessed stocks for a 9 months gestation period, we appear to have typically retested that horizontal line and trend upward into the best 2 months of the trading year. The struggling Fundamental forces seem to be a weaker Dollar with higher oil and gas prices going into winter, some trepidation on the part of foreigners to service our huge debt, and an apparent weaker Economy and S&P earnings forecast for '05. On the plus side, besides the seasonality, corporations have huge caches of cash which they refuse to spend on CapEx, so could bolster the stock market through dividends and stock repurchases. Most of MSFT's dividend on Dec. 2 will probably go back into the market.Mutual Fund inflows were $5B last week, and for the first time ETF Volume exceeded that of Mutual Funds, according to Trim Tabs.Sentiment extremes include a huge momentum rally in November (with short covering) with last week's 719 New Highs vs. 26 New Lows on the NYSE; IBD's fund cash remains high at 5.1% and the DJIA dividend rate is 3.93%. The ISE put/call ratio stayed high at 183.
On the overbought side, the McClellan Summation rose to 1105 while the Oscillator went negative and Public/ Specialist shorting lessened. Newsletter surveys showed Market Vane again at 70, with Investor's Intelligence 58% Bulls - only 22% Bears, same as AAII. Finally, the Bullish % is reaching old high levels at 72% of stocks on Buy signals.

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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BREAKIN' OUT IS HARD TO DO:

POST-ELECTION COMMENT - RIGHT,AGAIN - LEFT, BEHIND:

The oversold/Bush rally was to be expected -maybe not as strong as it was. The Dow Industrials went from the throwunder bottom of both the multimonth Trading Range of 9,800-10,400 but also to the top (throwover) of the Bollinger Bands as well. The current retest back into that TR is also indicated by some high levels in Sentiment:The CBOE Equity put/call ratio went from a bullish 79 on Oct.15 to 50 on Nov.5; the ISE p/c also changed from 203 to 129. My cumulative A/D numbers are at record highs, mirroring the high levels of the McClellan Oscillator (51) and Summation (995), ratio-adjusted. 75 and 1,000 seem to be the high limits, respectively. The AAII surveys made a quick trip from 42% Bulls/ 31% bears to 62% Bulls/21% Bears indicating the current retracement. Specialist shorting (always a belated statistic) dropped from 2.34 to 1.77 preceding the rally and speculative Volume (132 NAZ to 100 NYSE), and on the OTCBB, is contrarily high.Only the fullness of time will display whether we can continue upwards in these next 2 provident months and a "5"-year, with a weaker economy and a lame duck President with ugly things to accomplish. Welles Wilder's "amazing" Delta Phenomenon cycle calls for a 12/15/04 bottom running up to a April 15, 2005 peak.

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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POST-ELECTION COMMENT - RIGHT,AGAIN - LEFT, BEHIND:

ELECTILE DYSFUNCTION

As the DJIA closes on Election Day a scant 200 points BELOW the Labor Day level (history shows a 91% chance of Kerry being elected later this evening), we await the returns. In a Contrarian victory, after pundits have recommended Large Cap, Dividend-Paying stocks all year, we find the DJIA, SPX and Nasdaq all down YTD, with Transports, Utilities, S&P Small and Mid- Cap Indicies at multi-year record highs. Although Seasonality points to higher market levels at year-end ( mutual funds have dumped their losers through October), there are a couple clouds on the horizon: the Nova/Ursa ratio climbed above 20 for the first time in several months to 23; the Public/Specialist shorting number at 2.34 is near a 5-year high; and the CBOE Eauity put/call ratio dropped dramatically from a Bullish 77 last week to 59. Short interest still remains large on the SWH software holder, the Energy XLE spider, and the TLT 20-year Treasury. We now await the FOMC results on November 10 (probably the 4th rate hike), then the typical upwave short term and downwave intermediate thereafter.

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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ELECTILE DYSFUNCTION

BULLS DON'T HIBERNATE

This might explain why December and January are historically the 2 best months of the year, including the Christmas rally and January effect. As noted earlier in a Leuthold Group table, when the Fed raises rates, the serious decline doesn't kick in until after the fourth raise, which is expected November 10. although I distrust surveys done on small samplings, as many technical ones are, there may be some human anomaly or Nature's law which may guide us in our market forecast. The table shows a .33% market increase 7 days after the raise, and a 1.95% increase 22 days after (Dec.13). It is even more doubtful that we will hit these average percentages exactly, but coupled with the Kinchen Election cycle, the recent weakness, my hibernation effect, and several longer term Sentiment Indicators, we could see a meaningful winter rally. Also based on small sampling: there has never been a down 5th year of a Decennial Cycle in the 11 decades since 1890 (Inflation included); in fact, every rally has been of a strong, Elliott 3rd Wave nature. As the opponents of Social Security privatization argue - if the stock market isn't a gamble, why do they call them "Blue Chips"?If a rally is to ensue, there is little, if any, evidence of it in the Sentiment Indicators this past week; even after the huge selloff (mostly in the Dow 30 stocks), complacency reigns - in the ISE put/call ratio, cumulative A/D and New Highs stats, and newsletter surveys. Although below the 200-day moving averages, only the DJIA is below short term Support - if we break that this week, I'll be a believer in Kerry for the next 4 years!

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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BULLS DON'T HIBERNATE

October - the bottoming month

The McClellan Oscillator bounced up off its -50 platform to -21, while the ratio-adjusted Summation is coming off its Overbought +750 area to +783 (down from 960). Last week was the first negative Advance/Decline for the NYSE since Aug.6. One Bullish Indicator is the Nasdaq Volume to NYSE which slid under 100% to 99 last week - for the first time since the May '04 bottom which followed the sharp April decline. Also indicating a bottom is the ISE put/call ratio at a 2 month high of 158 (not extreme, however) after signalling the August 6 low of 9815 DJIA. The CBOE Equity p/c ratio is also the highest since Aug. at 79.
According to a mailer from Welles Wilder of RSI, etc. fame, per his Delta Phenomenon, the current bottom will not be put in until Dec. 15 of this year, followed by a large year-end rally into an April 15 top, then the huge decline into November 16 of '05. This is his "hidden order" of the market for the reliable 4-year cycle, which sells for $35,000 and includes shorter term turning data points.

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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October - the bottoming month

WHAT BEAR MARKET?

Looking at the 2004 Downtrend Channels in the DJIA, NASDAQ, and SPX one has to assume we are at best in a shortterm correction. How then to explain both Dow Utils and Trans are at New Highs, as are Cyclicals. CRB is at a 23-year high, Retail is 2% under a new high; Small Caps -S&P 600- is at a 10-year high - up 11% this year. Utils are up 81% since the Oct.'02 bottom, Techs up 75%, The DJIA, after rallying 78% from '02, is now up .618% of the downmove at today's 10,060.On the day before Labor Day the Dow Industrials were at 10,260 - if it is above that on Election Day, history says Bush has a 94% chance of winning the vote; 90% for Kerry if below. So quotes Barron's.As for Sentiment Indicators, my Cumulative A/D is at record highs and New Highs last week were also high at 609. The ratio-adjusted McClellan Summation is overbought at 928, and the Bullish near crossover 2 weeks ago in the Market Vane survey - 41% Bulls to 39% Bears proved to be a glitch, as we are back to 57/19. One of the most accurate Indicators - the Rydex Nova/Ursa funds ratio - is still at a Bullish 19, having called the recent July 1 top at 40, and the previous bottoms on May 20 and Aug.12 near 17 (we are still at 19 after several weeks).

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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WHAT BEAR MARKET?

VACATION TIME:

I will be on family vacation for the next week - October 1 through 11.

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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VACATION TIME:

HENNY, PENNY -THE SKY IS FALLING:

W.D.Gann was right about the Sept.22 date/ Autumn Equinox forecasting a major decline in the DJIA - down 135 on that day- and still falling. As of today, it is trying to hold at the multi-zero level of 10,000, but the trend is definitely down, as we are below both the 200- and 50- day Moving Averages in the worst month of the year.
A revisit of Jake Bernstein's 1991 classic - "Cycles of Profit" - has charts of U.S. stocks back to the French Revolution - 1790 - showing major Bear markets which always retest the ultimate lows (some higher, some lower), with the 1841 low retested some 16 years later. More recent lows (1990, 1974) took about 4 years. Since we have moved up 11,000 points since 1982 and 8000 since 1994, Fibonacci retracements of .382 and .500, respectively, would land us in the mid-7000 area. Although we have never had a down 5th year in 11 decennial cycles, the months before and after could be rough.
This week's exceptional Sentiment numbers are few, with a new high in the DJIA Dividend Yield of 3.46% boding well longer term; another recent high is the IBD short interest percent, at 6.39, almost to a 5 year high of 6.78, and above January's market top of 6.1. Bearish numbers include the VIX at 14.3, cumulative A/D, reflected also in the toppy McClellan Summation, although the Oscillator just slipped into negative territory at -13. And the Nova/Ursa Index, at 17, remains very Bearish as investors put their money where ther mouth is.

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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HENNY, PENNY -THE SKY IS FALLING:

HOPE, NOT GREED:

Most pundits in our industry use the phrase Fear and Greed to label the poles of Sentiment in investing - I prefer the kinder, gentler terms of Fear and Hope. I also firmly believe that it is a Technician's duty and benefit to examine the media heuristics and disciplines that govern our trading. For example - trading stops. Should one place stop losses at a certain percentage from the top, as IBD dictates, or use our Support lines and Moving Averages, etc.? I recently did a small sampling of my trading accounts (IRAs) for 2004, because I always had this paranoia that I wound up selling at the very bottom of the down cycle the Pain Point. As it turned out, of the 10 losses I sustained, 9 of them returned to my buy point and ran higher - to the tune of several thousand dollars. As the lone stock was a Gold stock, it validated my stock selection process in which I should have had more confidence. As a position trader I do not recommend buy-and-hold, especially in this environment, but an examination of Fear's "tipping point's" patient expansion needs to be addressed.Another area of Behavior worth exploring is whether today's investors are acting on value, or re-acting to forced moves of having to put money into our stock and bond markets. Some of these motives are historically low Money Market/CD rates, foreigners receiving Petrodollars, "outsourcing" dollars - foreigners' dollars from our record import/export deficit. Barron's mentioned an observation of W.D.Gann that the date of the Autumnal Equinox - @ Sept.22- has coincided with the tops in 1929, 1987, 1997 and 1998; there were also cycle reversals upward, as in 2001 after 9/11.
This week's Indicator extremes begin with my record high Cumulative Adv./Dec. number, a Bearish divergence with the DJIA turning down off the downward Trend Channel @ 10,400. New highs to new lows reached nearly 10:1 on the NYSE for the third week in a row. The McClellan Summation Index (ratio-adjusted) at 960 is at the highest level since the recent Feb.6 top of 10,626.

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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HOPE, NOT GREED:

AUTUMN RALLY?:

Is this the promised Election year's second-half rally, or just a continuation of what looks like, on a Bollinger Band chart of the Dow, the Dixie Highway headin' South? A wise sage once said "Never predict the Price and the Date of a market in the same newsletter!". Although Economists are prone to do this based on projected economic correlations to stocks ( remember how '04 was a bustout year for earnings?), most Technicians tend to react to a shorter term possibility based on Price, qualified by Volume, over Time. A fourth tenet would have to be Sentiment, or Contrarian indicators, of various timeframes, which at extremes can give excellent signals.
Starting with the Bullish signs that could break us out of the '04 narrow Trading Range would be a high CBOE put/call ratio of 77, a low ISEE option ratio of 99 (near its year low of 82) and a complacent new recent low in the VIX. The Ursa/Nova ratio is also at a Bullish low of 17.
Indicating that we stay in the downward Trend Channel are the low Volume numbers pushing a record Advance/Decline accumulation (my numbers) and a rather lofty ratio-adjusted McClellan Summation of 841; Barron's magazine/Longboat GAC reports a huge, first-time breakout of OTCBB (speculative Bulletin Board) Volume over Nazdaq Volume, as the NAZ to NYSE Volume remains high. With the hedge fund operators (@50% of NYSE Volume) looking to not get paid this year, we might expect increased Volatility in the remaining months of '04.

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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AUTUMN RALLY?:

REPUBLICAN RALLY:

Although historically the stock market has done better under Democratic presidents, investors seem to prefer a Republican in the Casa Blanca, as we have seen in the current rally surrounding the New York Convention. Strong sentiment indicators, like the AAII survey becoming inverted with Bears outnumbering Bulls recently, have finally normalized, as have Michael Burke's II numbers. The VIX hit a multi-year low of 13.9, indicating complacency or August boredom. Stockchart's Bullish percent, or stocks on a buy signal, finally retraced its 6% (3-box reversal) after bottoming in the high 40s.
Unfortunately, this rally might be short-lived as we zoom into the year's worst month - September! One very good indicator of mine - the Nasdaq vs. NYSE Volume ratio (speculation) hit a high of 136 which almost always spells disaster, whereas a low, especially under 100, invariably sees rallies ensue. Couple that with a record high cumulative Advance/Decline total and running headlong into the Intermediate declining tops line from February's top, and we could at least have a corrective hiatus any day.

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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REPUBLICAN RALLY:

THE ELEPHANT IN THE (CONVENTION) ROOM:

Even though the market seems brain dead the last few days of August, several surprising statistics are appearing: my cumulative NYSE Adv./Dec. total is at an all time high, although all markets have been in a Downtrend (lower highs and lows) since Jan. and Mar. And although there are some REITS, Closed-End Funds, etc. in the mix, most of these are on the AMEX, not NYSE. Leading New Highs are Banks and Finance stocks -REITs and CEFs, also a Bullish sign.
Also Bullish is the newsletter survey ratio, with the Investor's Intelligence Bulls down to 39.6 and the Bears up to 30.2 (Barron's Alan Abelson points out that these numbers were 38.9 in Oct.'02 and 34.8 in April '03, respectively). The VIX is at 14.7, a near term low, with its historic low at 8.8. Finally, the Rydex ratio is at a Bullish near term low of 17, a very accurate indicator recently.
The real fly in the ointment is that the esteemed Ned Davis has seen his indicators point to an imminent Bear market - hopefully we'll have a summer rally first!

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 ELEPHANT IN THE (CONVENTION) ROOM:

SENTIMENTAL JOURNEY

SENTIMENTAL JOURNEY: Ned Davis Research points out that since 1900 the second half of Election years are up double digits 81% of the time, with July/August being a good period for the market. Moving out, if Kerry looks strong, Sept./Oct. will be weak; if Bush is the favorite, Oct./Nov. will be positive for stocks.
This week's Sentiment standouts are the AAII survey with a tie at 34.9 for both Bulls and Bears after having crossed in previous weeks; the Public/Specialist shorting ratio hit a 5-year high of 2.57 and the Rydex Nova/Ursa low ratio of .16 are all Bullish for stocks. Near perfect over the past 3 years, highs of 50 to 70 have led to Tops; lows in the teens preceded Bottoms. With corporations, mutual funds and investors sitting on Cash, a strong rally could surprise many hedgers shorting ETFs bigtime (especially the SPY and XLF - finance Spider).

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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SENTIMENTAL JOURNEY

MEDAL ROUND -

For months now a unanimity of Talking Heads and Media Gurus have been touting favorite Industry Groups for this year as (GOLD) Energy, which might have just put in a double top, (SILVER) Healthcare, which has follwed the markets down, and (BRONZE) Cyclical stocks, which the revised XLY Spider exhibits heading for new lows. This action lends proof to the Contrarian theory, and Oil just might be following the runners-up into the dumpster after a double-tops in the OIH and XLE.
Exceptional Sentiment Indicators that are Bullish now are the CBOE put/call ratio at a high 83 (per Barron's), and the AAII Survey with still more Bears (40) than Bulls (38.8). At a '04 low is the Rydex Nova/Ursa ratio of .16 (Bullish) which has worked perfectly for high and low turning points. Also Bullish is the Public/NYSE Specialist ratio near a 5-yr. high of 2.46 as well as the multi-year high DJIA Dividend Yield of 3.3%, a great reason for buying, especially with the new tax advantage.

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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MEDAL ROUND -

DOWN Jones Averages

The DOWN Jones Average fell @ 3% last week, the NAZ 6% - that is the Sell signal that PNFers A.W.Cohen, Michael Burke and Tom Dorsey use ( 2-pt.box; 3-box reversal) for their benchmark. If it is a Wall of Worry that the Bulls need it is definitely there: imminent terrorism with the Republican Convention, Olympics, and the Election on the horizon. The Economy is at least taking a hiatus. Seasonally weak Sept. and Oct. loom just ahead, and the financial pages still look like the police blotter. Bulls can also point to a 17-year high in the Public/Specialist shorting ratio at 2.46; a recent record of 3.18% Dividend Yield on the DJIA (now tax-enhanced); and an IBD put/call ratio of 1.03 (83 on the CBOE Equity ratio). More importantly, the AAII Bull/Bear ratio CROSSED, with 31 vs. 33.8 numbers showing excess pessimism.
Using a timing strategy of 3 important market forces: Trend, Valuation and Sentiment, the 7-month Trading Range has finally been violated to the downside, which, unless it is a fakeout (Wyckoff Spring), would find no appreciable Support until the 9300s or 9000. The NAZ looks even weaker. Valuation is settling into the neutral range of high teens p/es ( a pendulum-swing washout first would be more traditional), and the Fed model of 10-year Treasuries actually points to undervalued stocks. Sentiment is mostly in the neutral range with only the few (above) extremes. Tricky times - it is best to use filters ( 3-day closes) for confirmations, and stops to manage the Volatility.

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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DOWN Jones Averages

ORANGE ALERT

Orange Alert: After a 10% decline on the Nasdaq (5% on the SPX) in July, one would expect more of a retracement rally ( so far less than .3%), even if it is August. Most Sentiment Indicators are resting comfortably in Neutral except for a crossing of the AAII Bulls/Bears at 34 & 36, respectively. This is usually a strong signal, even if it is only 1 Indicator. Even the ratio-adjusted McClellan Oscillator is exactly at zero. Perhaps the heightened Terror alert on the East Coast has frozen everybody's assets, providing a potential summer rally. Hardly boring, August will bring us the FOMC meeting on the 10th, the Olympics on the 13th and the Republican Convention in New York at the end of the month.
A Leuthold Group survey show the following effects of 6 interest rate increases on the market, in percentage.
Rate increase 7 days 22 days 126 days 252 days
1st .57% .76% 3.91% 9.87%
2nd .05 .96 3.93 .45
3rd .23 -.36 3.46 .72
4th .33 1.95 -1.37 -2.79
5th -1.44 -1.12 -5.38 -2.86
6th .13 -1.92 -5.20 -6.98

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

DAY OF THE DEMOS

Most Indicators are still coming down off Bullish/Contrary readings, so the downtrend is probably not quite over for the market as a whole. Exceptions are the VIX, which soared over 15% last week to 16.5 -@ 20 was the previous recent level for tops which provoked serious rallies both in mid-March and mid-May. Also, the Public to NYSE Specialist ratio jumped to 2.52,a 17-year high which, if you do the math, was 1987, a year of Infamy. The Dow dividend is at a recent high of 3.09%, also Bullish for stocks; and the SPX stocks are sitting on a high $1/2T of CASH. Some feel that spending this money ( on cash dividends, etc.)would lower credit ratings of the companies, hurting stocks. The IBD cites the SPX p/e ratio (operating earnings) at 17.7, just like March of '03. The 70-year average is 15.6, just below current.
Also hurting our markets are the lessening of Money Supply and the slowdown in Asian (especially Japan) investment here in recent months, probably due to similar worries of the Election, terrorism and interest rate creep.

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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DAY OF THE DEMOS

Dow Doldrums

Both Barron's and CNBC's talking heads are commenting about the narrow Trading Range the market has been in most of this year - unfortunately, most of the Sentiment Indicators are likewise quiescent. With the leading Indices at or below support levels (previous horizontal and 200-day MAs), we can only hope for a possible Inverse Head-and-Shoulders bottom, although unusual in a Re-Accumulation phase near the top of a trend. So far Volume seems to confirm one, if we do not break below the Head of mid-May on increasing Volume.
One safeguard would be to buy shares of a Bear fund such as URPIX which has a 2:1 leverage, meaning you have to buy 1/2 as much to hedge your portfolio ( USPIX would be better to hedge Nasdaq stocks).
Of my favorite Sentiment Indicators, only the Public/Specialist shorting is near an extreme (effective in Jan and June this year, with the Public being right); IBD's Short Interest chart is near  the highs where it correctly forecast tops last Sept. and Jan.'04. Bullish signs include an overall IBD put/call ratio at 1 and a Bullish divergence of the Advance/Decline line improving with the market descending. Also enticing, the DJIA dividend yield is just below $3, a recent record. 

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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Dow Doldrums

Critical Market Juncture

With 80% of past Election Year second half's showing up markets, this one is starting quite ugly; even Friday's up day was on very weak Volume at 1.1B shares NYSE. However, with both the DJIA and SPX right on the 200-day MA, a bounce could be expected very soon, just as the ratio-adjusted McClellan Oscillator bounced up off the zero line this past week - which has recently shown rallies when not following through to the downside. Concomitantly, the CBOE Equity put/call ratio spiked up to a Bullish 85 where for 8 of the last 8 topping spikes have provoked rallies. The ISEE put/call is also high at 202 - that is the 4-year-old International Securities Electronic Exchange, the first option exchange to announce going public this week. Also, for what it's worth, the DJIA dividend ratio, at 2.89, is near its 5-year high; and Public/Specialist shorting crossed up over the 2 mark, as survey Bears remain in the teens, both contrarian Bullish signals. Next support levels, should this "lite" support area break down, would probably be 1075-SPX; 9900 DJIA.

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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Critical Market Juncture

Statistic Sampling

Although both Fundamental and Technical Analysts rely on historical statistics (Those who ignore history ...) it is always wise to temper these with observation and caution. For example, on tonight's Nightly Business Report the well-respected Jeremy Seigel cited a survey on Election Year market performance the last few months leading up to the Election. Average % Up if a Republican wins: 4.8% since 1948, then another 4.2% in Nov.Dec. , much superior to Democratic victories; however, the following year reverses if a Democrat wins :6% vs. 9%.
When Drug companies seek FDA approval thousands of samplings are needed, as with political and economic surveys - how reliable is a handful of samplings? What is the likelihood of the market improving 4.8%this year? Very little! So we can use them as tentative guides, but warily.
Sentiment Indicators for the week: The ISE put/call ratio (I-SEE) approached a dangerous level of 210, a negative sign, as is the Mutual Fund cash dropping to 4.7% in the IBD survey. Also negative is the low Bearish outlook on both the Investor's Intelligence and AAII market surveys ( 17.4% and 15.7%-down from a mid-May 40-, respectively). Most other Indicators remain neutral for now.

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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Statistic Sampling

LAZY DAYS OF SUMMER

Monday, June 28 –Iraq Handover Day. Now the question is Interest Rates – up, but how fast? U. of Michigan consumer sentiment Index on interest-rate expectations hit a record 85% in May, says Merrill’s David Rosenberg – these levels usually occur at the end of rate hikes and Bond Bear markets. Other contrarian signals are the flat Basic Materials/Gold markets recently, if Inflation is a factor. Greenspan’s “measured” moves cannot afford to disturb the huge mortgage leverage of GSEs like FannieMae and other carry trade institutions that have loaned short and leveraged longer (in Trillions).
Indicators still appear neutral in this low-Volume, apprehensive market, with the VXN (Nasdaq's VIX) at a record low sub-19 and the VIX touching below 14.. Weekly Volume Indicators were slightly impacted by the rebalancing of the 21 Russell Indices last Friday,as the Nasdaq Volume to NYSE Volume ratio spiked up to 137%.

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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LAZY DAYS OF SUMMER

Downtrend

Hard to believe after hearing and reading every pundit/expert on WS Weeks (2),NBR, CNBC, Barron's expound Bullishly, that we have been in a downtrend since the first full week of 2000.With lower highs and lower lows into the Head and Shoulder Bottom of early '02, the minimum projection of that formation was 1850 points on top of the Neckline of 9050 (weekly charts), or 10,900. We rose 1700 pts.to the Mar.'02 high Resistance level, then resumed an Intermediate downtrend which we are still in until proven otherwise (taking out 10,750). Most Sentiment Indicators are neutral, coming off Bullish (negative for market and rightly so)levels, except for the Investor's Intelligence which shows Bulls at 55% and Bears only 17.5%, an extreme.

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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Downtrend

WEEKLY INDICATORS: JUNE 12

Most Indicators are in the Neutral range this week: CBOE put/call ratio slightly Bullish at 74, and the AAII market letter survey jumped from 33% to 55% Bulls, moving negatively. Strengthening A/D ratio and New Highs ratio reflect recent runup, now correcting from overbought during Reagan week.

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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WEEKLY INDICATORS: JUNE 12

WEEKLY SENTIMENT UPDATES:

18TH C.playwright Nicholas de Chamfort said it best:" Public Opinion is the worst of all opinions."
One of the few exceptions to Contrary Opinion has been Buying/Selling by Corporate Executives over the years. Since they are purportedly the "experts" of their companies and Industry Groups, they should be the first to see trouble down the road. For the last 2 years they have been extreme Sellers across the board, but have now switched to the Buy side, per Michael Santoli of Barron's. Only the fullness of time will validate their actions!
The current accepted wisdom of the majority of gurus and pundits is that Healthcare stocks will rule this decade and that dividend-paying large-cap stocks (mainly cyclicals) will dominate whatever market we find ourselves in.

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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WEEKLY SENTIMENT UPDATES:

Favorable Industry Groups when rates rise

According to Ned Davis Research, when the 30-year Treasury Bond yield rises, as we assume it will shortly, Technology hardware and equipment have historically risen 20%, Software and Services up 15% and Energy 14%. Worst groups include Utilities, down 13% Banking, Insurance and other Financials @ 2%.

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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Favorable Industry Groups when rates rise