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