YOU SNOOZE, YOU LOSE:

Recent columns have dealt with Closed-End Bond Funds, especially munis, that sell off at year-end and are bought back after the new year. Last Friday, on the Nightly Business Report, the CEF guru - Thomas Herzfeld - was interviewed about these and, although he echoed my comments, he did have different funds to recommend: symbols JQC,HTD,PIF,SCD,PBF,EVG, and HIX. Also, in Barron's over the holiday weekend, Bill Gross of PIMCO also made mention of this tax-loss occurrence, citing his own funds (which are not at a discount) and VKA, which is.This anomaly occurs again , usually in the March/April timeframe, so one should use their Technical tools for entry and exits, although 6% tax-free isn't a bad hold.
Not much changed in the Sentiment picture during the quiet week, with some improvement by the CBOE put/call ratio to 62, the McClellan Oscillator moving up through the zero line to 16; the AAII Bears improved a bunch up to 28.2, as the Bulls pulled back to 41.
The real standout was Public to Specialist shorting which shot up to a 12-month, even 5-year high of 5.68 - unless this is some kind of glitch number by IBD. It could also reflect yearend window dressing, but it shares the caution with the CBOE number.
Happy New Year - here's hoping for the Santa Claus rally this week and into next.

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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YOU SNOOZE, YOU LOSE:

HOME IN THE RANGE:

That elusive 11,000 level in the DJIA still is not in the cards so far this year, as we bump our heads on that cieling. Maybe the Holiday spirit(s) are making us too complacent as the I.I. survey reaches another high for the Bulls at 58.8 with the Bears at 21.6; While the AAII slipped a bit, the Market Vane Bulls remained at 70.The CBOE put/call ratio is down to 53, while the VIX touches 10 - the most complacent in a decade.
The McClellan Oscillator dropped down through the zero line (Bearish) to -21 - would like to see it reach the -50 level for a rally. The Bullish per cent is toppy at over 71The ISEE option call/put ratio ended the weekat 186, but rose on Monday to 233 (ouch)!
Odd-lot shorting does remain double last year even though earnings surprises and estimates are hugely positive for the week.Let's hope we at least get the Santa Claus rally between Xmas and New Year like we have for the past 8 out of 8 years!Happy Holidays to all!!!

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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HOME IN THE RANGE:

RED CHRISTMAS (WHOOPS-HOLIDAY):

IBD's Short Interest ratio on the NYSE is 5.26, quite Bullish. Although it set up the October rally with the new high of over 6, the previous '05 new high was only 3.47 back in April's market bottom. 5-year high is still 6.78. NYSE Public to Specialist shorting is still high, but dropping, at just over 3.

But dangerously complacent, precluding an immediate rise are the CBOE Equity put/call ratio at 61, and the Inv.Intell. Bull/Bears spread still widening at 56.2 vs. 21.9. Similarly, the Mkt Vane Bulls hit 70 for the first time in a while, as the AAII surveys also recorded dreaded complacency at 19 Bears with Bulls at 49.5.
For what it's worth, the Univ. of Michigan Confidence survey shot up nearly 10% to 88.7 - Ah! Christmas... The Rydex Funds Nova/Ursa is relatively high at 23, the same topping level reached last late July which ended the Spring Rally. Further danger is seen by the Bullish per cent Pt.& Fig. chart breaking 70 - the % of stocks on a Buy signal. Still not topped out, but flying the yellow flag.
The final Bearish nail is the ISEE call/put ratio, over the Bearish level of 200 at 211 ( remaining at 213 on Monday, the 12th). Finally, Barron's reports that with a large number of corporate Insiders selling, the most vulnerable is the Retail group with 6 to 10 times normal - shoppers! let's get out there and spend!!!

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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RED CHRISTMAS (WHOOPS-HOLIDAY):

DECEMBER 2 - A WEEK THAT WILL GO DOWN...

in the stock market, according to Tom McClellan - and he was right. He called the Nov. 28 top of the recent rally in his newsletter , and although he said the cyclical bottom would occur Dec. 5, today's rally doesn't convince me until a preponderance of Sentiment Indicators turn more negative.
Although NYSE Short Interest is double that of a year ago, complacency still runs rampant especially in the Bullish Per Cent Pt. & Figure chart at 68, nearing a topping zone; I.I., or Investor's Intelligence, measure a 55.8% Bullish to 21.1% Bear ratio (as does the AAII survey), a large spread. The Rydex Nova/Ursa climbs higher, to 23, still in a medium range boding well for longer term. Worst of all is the McClellan ratio-adjusted Oscillator coming off its toppy 51 last week to only +27 Friday - hardly a bottom.
Holding fast are the IBD short interest ratio and Public/Specialist at nicely high levels, and Mutual Fund Cash took an upturn at 4.6%.
Hopefully, once this Institutional year-end Selling is over, the rally will resume, culminating in a Santa Claus rally between Christmas and New Year's, as it has for 8 of the last 8 years. What should really clear things up in the financial markets is the fact that the number of Economists has increased 30% to 30,000 in the U.S. Former Pacific Coast Exchange Lee Korins once described an Economist as one who was good with numbers but didn't have the charm or charisma to become an accountant!

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 2 - A WEEK THAT WILL GO DOWN...

TERM-INATOR:

At this week's Gold Conference in San Francisco, a newsletter by the Aden sisters looked back to prior double-term presidents and the effect on the Stock Market. Lyndon Johnson's second term contained the end of the 17-year cycle Bull market from 1949 to 1966 ( Harry Truman's double session was just prior to this cycle) with a 25% drop during Viet Nam; Nixon's stumble with Watergate saw the '72-'73 Bear; Reagan's Iran-Contra dustup preceded the 1987, 36% drop, while Clinton's scandal coincided with a 38% decline just before he left office. Googling the 1900s before these, only Ike, post-WWII, left office without the Bear chasing him out: Teddy R-1903; Woodrow W.-1918; Coolidge left just before 1929; and FDR had his second term decline in 1942. That's 9 out of 10 -pretty good odds against George W. for '06 or '07, also bad years for the 4-year Presidential cycle.
We'll have to see if this theory applies to Arnold the Terminator if he gets re-elected. Previous two-timers were Gray Davis, Pete Wilson and Geo.Deukmejian.
Today's negative action was foretold by a couple of extended Sentiment Indicators, at least short term: the McClellan Oscillator (ratio-adjusted) broke the 50 mark, rising to 51; the ISEE call/put ratio screamed to 295 Friday - way over the 200/bearish line. Nearing the overextended zones are the Bullish per cent - at 64, still not toppy until mid 70s. I'm still awaiting a couple more indicators due to Barron's recent delinquent delivery service.

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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TERM-INATOR:

GIVING THANKS:

Finally the stock markets have given us a decent rally, from the predictable October selloff lows. Short term we might be running out of gas as some Sentiment Indicators get somewhat extended, but not yet at extremes.
The net between weekly Advances and Declines has diminished from 1377 to 412 to 284 over the past 3 weeks, and the NYSE new lows increased. Much of that was the year-end selloff of muni and other closed-end funds for tax purposes. As I mentioned in my talk before the Investor's Daily group last week, this can afford a January-effect opportunity in the CEF arena as the sellers re-buy in January. Meanwhile you get @6% tax-free yield while you wait. Some examples of these are: BMN,NCP,VCV,MUH, et.al.
Elsewhere, Mutual fund cash is at a low 4.4%, the VIX is 11.1 and the ISEE call/put ratio is nearing a Bearish 200 mark at 181. The McClellan Oscillator is a plus 32, not yet in the toppy 50-75 range and survey Bears are receding.
Still Bullish, however, are the Panic/Euphoria Index, a master indicator found in Barrons, at -.67; Public shorts and short interest is in a high range, albeit off the extremes. As to the elephant in the room - the hedge funds - recent TSAA speaker Jim Bianco notes that of the 9,000 hedge funds investing in futures, currencies, arbitrages and long-short stocks, a great many have underperformed this year and as the investor lockup expires, may have to redeem stocks to pay them off. On the other hand, they do have cash from selling losers and covering shorted stocks.
Finally, the Bullish per cent at 61 is high, but not at the tipping point of previous turnarounds. And in the Intermediate scene we are in the best months of the markets.

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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GIVING THANKS:

STAYING THE COURSE:

Although we are coming off the Bearish Sentiment extremes that prompted my RALLY cry a few columns ago, we still appear to be in a rising mode as we enter the favorable months of the year for stocks, especially around Thanksgiving. Early December might be correctional as Institutions and hedge funds sell losers, take profits and avoid the 30-day wash rule (possibly buying call options a month prior to selling stocks).Still at high levels are short interest (record for Nasdaq) and Public/Specialist shorting at 4.74 and 3.77, respectively; the Panic/Euphoria Index is way low at -.69, Nova/Ursa is rising slightly at 19, and the CBOE put/call ratio is a Bullish 62, but off its Oct.14 high of 76.
Exhibiting caution are the VIX, now at a complacent 11.6, and various surveys such as Investors Intelligence at 50 Bulls/ 24.7 Bears amd the AAII Individual Investor poll at 58/23. Univ. of Mich. Confidence came in high at just under 80. And mutual fund cash is a low of 4.4%, although corporate cash stands at $2T, per Market Maven Stephanie Pomboy - this should be spent eventually in buybacks, dividends, or capital expenditures. The ratio-adjusted McClellan Oscillator is nearing a high area at 37 (75 seems to be Resistance), and the Averages/Indices (DJIA, Nasdaq, SPX) are also reaching previous toppy areas which might call for at least a stopping and reaccumulation for the Xmas rally.
That's it for now - we welcome any comments!

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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STAYING THE COURSE:

BORING!

Sometimes, with the aid of cycles, seasonality and sentiment, the market action can be totally predictable. Although September did not follow the pattern of down months, October did contain the typical year-end selling by mutual funds and profit taking by institutions, and hopefully, the seasonal low. Also typical is the last day and first 4 days of the months, especially Oct./Nov., which we are now seeing. With December and January the best months of the year for the market, we can only hope this will continue.
Sentiment-wise there are some hopeful signs: Odd-lot shorting is at record highs, 4 times the number year over year; and Nasdaq short interest is also at record levels, with Public/Specialist close behind. Barron's Panic Index is at a low -0.73.One of the most reliable of Indicators, the AAII Survey, has once again inverted with 46% Bearish and 32% Bullish.
The McClellan Oscillator is pushing up thru the zero line and the Summation has gone lower to -585, a support area. Finally, the CBOE put/call ratio, although off its last week highs, is still Bullish at 60, with the ISEE at low 125.
Possible negatives for the market are the mutual fund cash level, a low of 4.4% per IBD, and, of course, the usual Fundamental suspects of higher rates and oil prices, tired Bull market and economy, blah, blah, blah.

Personal note: I have been asked to again teach an online Technical Market Analysis course at Golden Gate University this Spring semester, and will give a talk on Sentiment at November's Investor's Business Daily monthly meeting, which will be in the 16th - which is the 3rd Wednesday - due to Thanksgiving occurring in the 4th week. It is Schwab headquarters on Montgomery St. at 7 p.m. for those interested.

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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BORING!

"WALL" STREET:

For a Contrarian, an ascending market requires a "Wall of Worry" so that the smart money gets in early, while the later adopters (mutual funds, retail investors) finally ride the momentum wave trying to catch the last 10%. Last week's RALLYTIME column opined that there was enough negative Sentiment around to stop the downturn - at least temporarily. One "Brick" in the wall is that there was no Selling Climax on large Volume. Other bricks include reports that although foreign investors (85% of them private) and U.S. money managers are repatriating money back to the U.S., possibly because of a rising dollar due to rising rates. Unfortunately, with the American stock market ranked 21 out of 35 in value, almost all of this money is reportedly going into BONDS - Corporate, Treasury and Agency.Sans a Selling Climax, the coming weeks ( usually the best of the year) may just "limp in" - as they say on the World Poker Tour - making for a positive close in this 5th year of the decade. Here are what my indicators are saying: The CBOE Equity put/call ratio is at a high 70 with the VIX on Friday measuring 16, up over a point. The McClellan Oscillator is -17, but the Summation is quite low at -560, previous lows this past June and August bode for good rallies within a few weeks. The Bullish per cent at 50, again is not at an extreme nadir, but is at a previous Resistance, or nesting point. Surveys of newsletters remain negative as far as the complacency Bulls vs. Bears. Both the UBS/Gallop poll of Investors' optimism and the Univ. of Michigan Confidence Index are at 5-year lows. Barron's Panic/Euphoria Index from Smith/Barney is at a low -.62; Specialist shorting vs. Public is at a 5-year high of 4.98. Finally, the Nasdaq vs. NYSE Volume does not reflect speculation and the VIX vs. VXN is unusually strong as OTC big caps mature.

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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"WALL" STREET:

COACHING/TUTORING

After 5 years of teaching Technical Anaylsis at Golden Gate Univ.'s graduate division, and 20 years of investing/brokering, I have decided to make myself available for tutoring/coaching - prompted by an exceptional investing year in a flat market (22 gains, 4 losses in my trading IRA). These sessions will be held at a comparable rate of my Trombone coach, massuese, and golf pro - $80/hour (tutoring); $50/ 1-2 hour (coaching, repairing, critiquing). Anyone interested can contact me at :leonbrnt@aol.com or 415-673-6488 Brent L. Leonard, CMT

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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COACHING/TUTORING

RALLYTIME!

Back from vacation in Southern California with family and friends, missing all the ugliness so typical of Sept./Oct. markets. For decades market lows have mostly occurred sometime in October, and although this may not be the final low of the year, several Indicators are at Pessimistic ( read Bullish) extremes - enough so to take a partial position for a year-end rally, with stops, hedges, etc.).Breadth figures, thanks to profit-taking by hedge funds, et.al, and window dressing by mutual funds selling losers, has been ugly - last week the NYSE Adv./Decl. was nearly 1 to 4 with New Highs 1 to 10 vs. New Lows, a cathartic Climax. CBOE Equity put/call numbers (and IBD's graph of same) were 76 and off the charts, respectively. Although I am leery of small samplings often used by Technicians, when several seem to "nest" together, it gets my attention: the VIX hit 16 for the first time since this year's rally started in the April/May timeframe; the McClellan Oscillator bounced off a minus 75 low last week and the ratio-adjusted Summation went negative for the first time since April. The I.I. Bullish survey's Bears hit 29 for the first time since April and the AAII Bears crossed up over the Bulls 48 to 39, a very reliable signal. UBS and Univ. of Michigan Confidence numbers are way low. Rydex's Nova/Ursa ratio hasn't hit the 15 of last week for over a year, hitting 16 last Aug. and Oct. of '04 lows. Barron's new Panic/Euphoria Index hit -.59, lowest since June's -.65 ( it was -1.0 in May). So if we're not putting in a low in the next couple of weeks, we're at least within striking distance. Failing to make it unanimous are the Bullish percent numbers ( low, but still on a Sell signal) and mutual fund cash. However, if the housing market peaks out, we may see a rush into stocks like the rush out of them in 2000, going into low interest rate mortgages. Another small sampling - in 11 of 11 decades since the DJIA was born, the market had an up year in the 5th year. Can we please make it 12 of 12?

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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RALLYTIME!

TEACHING/COACHING:

Surveys show I.I. Bears at a new high of 28, while the AAII Bears receded a bit with the "inversion" of last week normalizing again. However, on the negative side, the NYSE new highs to new lows were more than 10 to 1 last week (Climactic?), the Bullish Percent is high - hanging on a 3-box sell signal. I would proceed cautiously in this seasonal minefield, looking to the right Industries.

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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TEACHING/COACHING:

LABOR PAINS:

Despite the gulf hurricane disaster, the tightening Fed, a weaker Dollar, lowered consumer and GDP estimates, seasonal roadbumps - you name it - the upward potential of the stock market that I mentioned last week is gaining more Sentimental momentum. Market downturns don't start when the Nasdaq Volume recedes against the NYSE, as it is now - at a new recent low of 88 (150 is usually a speculative top).
The McClellan Oscillator screaming up through the zero line (to +3 from last week's -39) is Bullish, as are other Indicators such as another recent record high in Public to Specialist shorting ratio at 3.53 (rarely above 3); short interest also remains high; and the Barron's Panic to Euphoria fell farther into the Panic mode at -0.48.
Rydex Nova to Ursa funds' ratio remains low at 18, while the AAII survey flip-flopped back to the inverted Bear-over Bull ratio of @ 38/32, with the Investor's Intelligence Bears clawing up to a high 27.3%. Shorters beware! (at least in the short term).

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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LABOR PAINS:

W(H)ITHER GOEST THOU, DOW?

As the Dog Days of Vacation come to an end on lower Volume, the DJIA finds itself bound by the same old Trading Range, bouncing off the 10,400 area (although unlike the SP500 and Nasdaq it did break the 200-day MA), even with the hurricane catastrophe. Oil prices spiked to almost $70, but settled back as Bullishness on Oil is at extreme highs, connoting at least a temporary respite, with Summer traveling ending.
Although we've had a nice Summer rally going back to April, several Sentiment Indicators are still showing an upward potential after the August decline: the CBOE put/call ratio is quite high at 65 (a combination of put buyers hedging their gains and those speculating on a downmove); the McClellan Oscillator is still in the low range of -39, and the I.I. Bears hit 25 for the first time since early June (with the AAII Bears dropping back to 31 after last week's aberration); the Rydex Nova/Ursa fund ratio fell back to April's 18 level, and Barron's new Panic/Euphoria Index fell below the -.30 line at -.42.
Lastly, the Public to Specialist shorting ratio, after screaming to new highs of over 3.6 last Spring, again broke up through the 3.0 level (per IBD), and the NYSE short interest ratio hit a 2005 new high (5.91) last seen with October's 5-year high of 6.78.
Beware the conventional wisdom (an oxymoron?) of Sept.-Oct. always being the worst 2 months of the year for the market, widely disseminated by WSJ, CNBC, et.al.

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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W(H)ITHER GOEST THOU, DOW?

TUTORING/COACHING:

After 5 years of teaching Technical Anaylsis at Golden Gate Univ.'s graduate division, and 20 years of investing/brokering, I have decided to make myself available for tutoring/coaching - prompted by an exceptional investing year in a flat market (22 gains, 4 losses in my trading IRA). These sessions will be held at a comparable rate of my Trombone coach, massuese, and golf pro - $80/hour (tutoring); $50/ 1-2 hour (coaching, repairing, critiquing). Anyone interested can contact me at :leonbrnt@aol.com or 415-673-6488 Brent L. Leonard, CMT

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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TUTORING/COACHING:

BUBBLE,BUBBLE, OIL IN TROUBLE?:

Wachovia analysts report that the Bullishness on Oil prices is now a recent record high of 81.5%, a big number in any survey. Although a correction is due, it's probably not the end of the secular move, considering all the Supply and Demand factors. With the housing/homebuilders group also topping out, leadership in the total market is suspect, although a couple Indicators are still showing a Bullish rally might ensue following this August correction we've just experienced:
Although the benchmark Investor's Intelligence Bull/Bear survey is still complacent at 57%, the AAII (Individual Investors) has slipped 10 points to 29.3 with 40% Bears crossing up through, a rarity. And IBD's Public/Specialist shorting just broke through the 3 level at 3.06 exhibiting the caution necessary for at least short rallies. The McClellan Oscillator posted a -40 reading, near the bottom of a "normal" correction range. Finally, the Nova/Ursa ratio slipped under 20 to 19, last seen in April's rally beginning, and before that - October.

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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BUBBLE,BUBBLE, OIL IN TROUBLE?:

CROWNING ACHIEVEMENT:

In what technicians call a CROWN, the DJIA seems to be rolling over in a failed Summer rally, not even reaching the highs of Spring. Although, as noted the last week or so, several Sentiment Indicators have reached toppy areas, the market needs this congestion, or Trading Range, to mount a successful downward move. Just as in upward Accumulations, topping Distributions need the "Effort" to create the "Result", although occasional V-spikes do occur after crises. Market leaders home builders and energy stocks led the way down in pre-option expiry profit-taking - time will tell if they are in a corrective mode, or if it's the end of the dance.
Indicators still at extremes this week include the CBOE Equity put/call ratio still at 61, Investor's Intelligence (I.I.) even more Bulllish ( a Bearish sign) at 59 Bulls with Bears at only 19%. Bullish per cent at 73 is coming off its high in the toppy zone.

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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CROWNING ACHIEVEMENT:

ENDLESS SUMMER?

The Summer rally, which was suspect due to lack of Volume and the few number of stocks leading it, finally came to at least a short term end last week. Many of the Sentiment Indicators foretold it the last week or so:
The CBOE put/call ratio reached 60 the previous week (and 61 last week); and the ISEE call/put ratio hit its alarm of over 200 (206) - 205 two weeks ago. My cumulative Advance/Decline number hit a stratospheric 66,465 before backing off last week; and the McClellan Oscillator reached a minus 47 this past week (-50 seems to be the normal turnaround level), and the Summation had hit 940 the previous week (+1,000 serves as its upper limit).
Bullish surveys were hitting high levels of 57 (I.I.,AAII, and Market Vane) with AAII Bears at only 17.7%; the new Barron's Panic/Euphoria chart also broke above the Panic line of -.30 for the first time at -.27, followed by -.29. And most importantly, the Bullish Percent topped out at its usual range of 74-75 stocks on Buy signals.
Technically, the Industrials also reached its Resistance level just under 10,700. Hopefully the correction will take a breather at minor Support levels of 10,420 (DJIA); 2160 (Nasdaq); and 1215-20 SPX, while the largerr stocks sit on the 200-day MA.

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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ENDLESS SUMMER?

I'm "Baaaaaaack"!

After 1 week vacation and major back/spine surgery, both of which prohibited updating mktsentiment.com ( I prefer vacation), I notice that not much has changed in these low volume dog days of Summer. Despite a steady bullish rise since late June, to current heights of June 17's 10,656, not much has changed inthe Sentiment world.
My cumulative adv/dec total seems way overextended to new highs of 66,465 but the steady climb of A/D and New Hi's/Lo's is weakening, as is the Dollar. This past week the CBOE Equity put/call ratio spiked up to 60, which is Bullish, and the VIX jumped up aa point to 11.57 (10%). The Bullish percent has reached a toppy level of 74 (74% of stocks in the S&P500 on a BUY signal), and the Smith Barney Panic/Euphoria Index finally broke out of Panic at -0.27, but a +6 is needed for Euphoria.

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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I'm "Baaaaaaack"!

END OF QUARTER:

Despite two ugly days last week, as they square positions for the quarter ending, not too much changed in the realm of sentiment. What with rebalancing the Russell Indexes, institutions and hedge funds selling losers and buying winners (read Google) for window dressing, even a 300+ point drop in the Dow only changed a few of my signals:The ISEE put/call ratio, getting more attention now that the ISE is coming out with new futures on gold, oil, etc., went to a Bearish 247 (well above the 200 mark), the McClellan Oscillator went minus to -21 from +45, with its concomitant Summation rising to scary highs of +784 in spite of a negative A/D on the NYSE for the week. Adding to the Bearish view, the AAII Bear number slipped further to only 18.2, with the I.I. at 20.2, while the Market Vane Bulls shot up to 70.

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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END OF QUARTER:

CHERCHEZ LA RESISTANCE:

Although not Indicators themselves, Horizontal Resistance levels constitute a psychological area where previous buying and selling has taken place, either by self-fulfilling technical analysis, automatic stops or computer alerts.
This past week the DJIA stopped just shy of the 10,660 Resistance, closing Friday at 10,623; the Nasdaq closed at 2090, just under the 2100 level; and the SPX right at 1216. Monday then reversed down at the open, which it does frequently after Quadruple Witching when previous price action was rising.
Only a few Sentiment Indicators remain short term Positive this week: Adv/Decs were strong at 2600 to 900, and the New His to Lows were a climactic 9:1. Barron's Panic/Euphoria Index is still in the Panic zone, barely, at -.46; the NAZ to NY Volme is not speculative as yet, and the Specialist shorting is still benign.
What stands out on the topping scenario are the following: my cumulative advance/declines reading hit a new alltime high of 62,015 while the concomitant McClellan Summation also broke the 750 boundary by the Oscillator hitting a high of 45; the survey Bears are receding with the AAIIs at 18.8 and I.I.at 20.4; Market Vane's Bulls are at 69. Even the U. of Michigan Confidence Index rose to 94.8 from 86.9. While the Bullish percent has seen higher tops, up to 78, it is now at 66, where previous tops have occurred.

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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CHERCHEZ LA RESISTANCE:

THE END IS NEAR:

In spite of today's 60 pt.runup in anticipation of ??Flag Day?? (why not), too many Sentiment Indicators are warning of a complacent top nearby: I.I., or Investor's Intelligence Bearish % at 20.9 is a low for '05 while the Bulls hit 50.9 -although it was at 55 and 56 at the mid-March and mid-Feb tops. My cumulative Adv/Dec topped 60k for the first time since that March top.
The VIX is also at a Feb-Mar yawn level just under 12; the McClellan Summation is at a high of 577, not seen since Feb-Mar when it topped out at 707.
The Bullish per cent is at 64; five times it topped at that level in recent months, although it could go somewhat higher. Finally, a new Indicator I am tracking is the IBD short interest ratio now at 5.8 (6.7 was a 5-year high, also a topping sign).
Since 1990, Summer is the only season with a negative return in stocks, (-1%) vs. 2 to 4% rises in the other three, despite Sept. and Oct. performances. While I dislike relying on small sampling like this (15 years), due to all the above data, I would certainly be wary in the near future as Volume continues to dry up.

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 END IS NEAR:

JUNE SWOON:

The market seems to be taking a well-deserved rest from its May runup, rolling over into a Trading Range, hopefully bounded by previous 10,370 Support of "horizontal trendline touches" in Nov., Jan., Mar., April, and May, where Sellers have come in. The 10,550 Resistance we just encountered was also formed from these same months visits, so one can hope for a containment within these bounds ( for approximate SPX (S&P 500) numbers, one can multiply current levels (10440X1193), then divide by the Dow numbers 10370 or 10550 to get comparative SPX levels).
This week's Sentiment Indicators reflect this tired rolling over in the McClellan Oscillator, back down to 40 from last week's 47 top; Public to NYSE Specialist shorting back down to 2.33 from a record 3.29; NAZ to NY Volume is a high 130 -speculative- ratio; and too many newsletter surveyees are Bullish (AAII at 48.6, I.I. at 47.8).
On the flip side, indicating that the Bull move isn't over, are: DJIA dividend yield increasing to 5.08%; Bullish per cent in a Long trend at 62%; CBOE put/call at a cautious 62 and New Highs screaming at 373 to only 47 New Lows.
Best Sectors, per Barron's Market Lab, are Basic Materials, including Oil, and Consumer Goods and Services. Gold and Silver have rallied the last few days, but are approaching Resistance from previous levels, Bollinger Band tops and MAs.
That's it for now, if you have trouble understanding my esoteric acronyms , initials, etc., check out last week's column for explanations. Also, please feel free to comment with suggestions, alternative successful indicators, or questions

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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JUNE SWOON:

VALIDATION:

I recently made the statement that the reason Sentiment Indicators were so important to a stock investor was that 70 to 80% of a stock's movement is predicated on the overall market and individual Sector's and Industry Group's behavior, not the stock's fundamentals, although they are important longterm. In my recent column, "Mayday,M'aidez", I made the observation that several of my Sentiment Indicators were at extremes, calling for a market rise: Specialist shorting of stocks vs. Public was at a record 3.67;Investor's Intelligence Bearishness was 29.7%, also a recent record high; Univ. of Michigan Confidence at a record 87.7; and an INVERTED Bull/Bear ratio in the AAII survey!
Since then, the Nasdaq has risen over 9% (not a bad full year return)and still going.
This week, several Indicators have moved into midrange (not quite overbought yet), although the McClellan Oscillator is nearing its upper boundary, and Volume has actually been declining during the upmove. Also, the Nova/Ursa fund ratio is at 24, where it was on April 8, before an ugly downmove. Another notable extreme is the speculative Nasdaq Volume vs. NYSE ( a recent high of 122), and longer term Bullish signs include Barron's newly added Panic/Euphoria chart still barely in Panic mode of -.7 (please see previous blog for parameters), and the Bullish percent of stocks on Buy signals just gave a Buy signal itself at 58. Finally, the delayed Public/Specialist short ratio climbed back up over 3, a contrary signal.
So, the Jekyll/Hyde week so far is probably due to hedge fund profit-taking May 31( a Trillion dollar entity), and start of the month funding and Money Markets (another Trillion dollar entity).
READERS: Now that Haloscan has kindly made it possible to post comments with joining Bloggers, I would appreciate comments such as other favorite Sentiment Indicators that have a proven record, and thought-provoking comments and questions which I'm used to experiencing in the graduate CyberClasses on Technical Analysis that I've been teaching at Golden Gate Univ. the past 5 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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VALIDATION:

SENTIMENT INDICATORS:

Listed below are the Contrary Opinion statistics that I use on a weekly basis ( any more frequent would be redundant). As any analysis is more an art than a science, each Indicator is only as useful as its timeframe and consistent accuracy:
Rydex Funds Nova vs. Ursa - the ratio of Bullish investors divided by Bearish. Recent range boundaries are 16 (Bullish) and 38 (Bearish, with too many optimists).
Option Put/Call ratios: My favorite is the CBOE Equity (shoeclerks) ratio where the high 60s and 70s indicate too much put buying (pessimism) and is therefore Bullish - the new Int'l Securities Exchange (ISEE) index is also tracked for overall sentiment (professional and retail).
Volatility Index, or VIX - a long term signal of complacency, has been in the low to mid-teens for several months and is more a coincident signal rising when markets sell off. It tends to travel in Trading Ranges, starting in single digits (8.8 was the all-time low), then into the 50's after the Millenium shakeout, now making new recent lows @ 12.
Newsletter surveys - various databases of futures traders, newsletter writers and shoeclerks (AAII), although based on what thesy "SAY", not what they "DO", is still useful to follow. Crossovers, where Bearish sentiment rises above Bullish is extremely significant. I watch AAII, Investor's Intelligence, and Market Vane - Bullish Consensus barely moves.
Confidence surveys - Univ. of Michigan and UBS are worth watching for extremes.
Mutual Fund cash - there are several iterations of this figure, whether in Money Market funds, or held back by the manager. Investor's Daily (IBD) has a very slow moving and often adjusted (like government work), but worth tracking for liquidity.
Nasdaq Volume to NYSE - gives the degree of speculation among investors, ranging over 5 years from 79 to 244%.
Barron's Trader's Smith Barney Panic/Euphoria Index just came out in their latest revision of the weekly. It is bounded by -1.5 (Panic) to +1 (Euphoria) now lying within the Panic zone.
My final FEAR VS. HOPE (I prefer Hope to Greed) Indicator is the delayed Public to NYSE Specialist short selling ratio, usually reported 2 weeks later, but useful in a longer trend.

I also combine Momentum Indicators with Sentiment as well as Volume, the tools of a Technical Analyst. These include: McClellan Oscillator and Summation Indices: are more of a momentum Indicator, like Advance/Declines (on which they are based) and New Highs and Lows. I find the shorter term Oscillator bounded by +75 and -100, where approaching these numbers dictate caution.
Finally, I never thought I would see 5% DJIA Dividend again, after the introduction of tech stocks into the Dow 30, but it is here now. 6% is the classic turnaround from a Bear market, with an average P/E ratio of @8 - that we have yet to see.

All of the above information is publicly available for free, from Barron's Market Laboratory, Investor's Business Daily, and websites.

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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SENTIMENT INDICATORS:

MEMORIAL DAY:

A time for reflection - not only on our veterans and fallen heroes, but in my case a suitable time to reinvent my Blogsite for the following reasons: as mktsentiment.blogspot nears its first anniversary, and I feel even more strongly committed to recording and expanding the material, I want to take advantage of the exponential boom in the blogging movement. Every day there are more RSS feed directories and sites to link to, reaching more eyeballs.Although I have been studying Sentiment since my CMT (Chartered Market Technician designation) thesis was devoted to it 10 years ago, it has been validated again recently, just missing (by 1%) the top 10 stock pickers in Barron's annual educators'/students' contest - and outperforming the S&P 500 by @5% over those 3 months. The overall winner, up @50%, also used Technical Analysis of which Sentiment is an important part.
Recent requests for me to speak before groups such as my Technical Analysis local group (tsaasf.org) and Investor's Daily meetup, have reinforced the concept that, since most of a stock's price movement ( up to 70-80%) is due to the strength of the overall market and Sectors/Industry Groups, people are tired of wasting a lot of time analyzing a sea of Fundamental data, yet still cannot outperform a generic index of both good and bad stocks. The '90s saw a huge increase in Information Transparency, lower commissions and spreads, but resulted in the worst stock crash in history because of faulty valuations and corrupt officers and accountants.
The new blogspot.com will also by more user friendly, both in material definition (originally intended for a savvy group of Technicians as an appendage to the TSAA Review and its website currently under revision), as well as opening up the "comments" area (thanks to Haloscan's ability to override Blogger's requirement of membership for commenting). Starting this week I will break down the publicly available Sentiment Indicators I use, and explain their timeframe and accuracy. Please Stay Tuned!

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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MEMORIAL DAY:

Haloscan commenting and trackback have been added to this blog.

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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EXCEPTIONS NOTED:

In 14 out of 18 post-election years (as is this one), from 1913 to the last Bull market start in 1982, there was a Bear market - thereafter for the next 4 (1985 on) we had up markets which came home to roost in 2001. Since we are currently just negative on the year, will we get back to the majority opinion, or will the record of "never down in the 5th year of a decade" become 12 of 12? This week's extremes include: the UBS Investor Confidence Index is at a 2-year low of 50, mostly due to high oil prices; and although the Nasdaq was up 5 days last week, the New Hi to New Lo ratio was negative, indicating a bifurcation somewhere. The McClellan (ratio-adjusted) Oscillator, which usually tops out at +75, has done so lately @50 - this week it ended down to +41, portending ST caution, although the longer term Summation just broke positive, to +39. And the Bullish Percent on the SPX has bottomed out at 50, but is not up 6% (3 boxes on Pt.& Fig.) to warrant a Buy signal.

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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EXCEPTIONS NOTED:

paraskevidekatriaphobia:

Fear of Friday the thirteenth was indeed warranted, at least for the large cap stocks last week. On the contrary, the recent stepchild Nasdaq held up quite well as techs started to breathe life again. Even though several Sentiment Indicators remain (Bullishly) pessimistic, such as aforementioned put/calls, Nova/Ursa, public shorts vs. Specialists, other signs keep the Orange caution light on: all 3 major Indexes are below their 200-day MA, and have slipped into the old, lower Trading Range - 10,400 to 9,700 on the DJIA.
The first quarter of '05 saw record stock Buybacks, which is a market-topping signal; Hedge Funds, which have increased assets to $1T (10-fold since 1994), got whipsawed by Kerkorian's Buy-in and S&P's bond downgrade. Being on the wrong side of both occurrences, we could see another LTCM reaction from some 20-something genii running money by algorithm. New highs on the dollar and a flattening yield curve negating carry-trades aren't exactly helping these poor unfortunates. The Dow 30 dividend yield broke 5% this week and the U. of Michigan Confidence survey hit another new low at 85.3, giving hope of a Summer rally.

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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paraskevidekatriaphobia:

SINKO DE MAYO?:

For years May was the best month of the year for the DJIA; the era before, it was one of the worst, per Yale Hirsch's Almanac. With both the NASDAQ and DJIA below their 200-day MAs and very important Resistance just above, the short term doesn't look that great, after the usual first-of-the-month inflow of money. The SPX (500) of large cap, dividend paying stocks looks healthier, just above its 200-day and resting on the 1163 Resistance-turned-Support. This is also in synch with the NYSE/NAZ Volume ratio, which is at its lower end at 113(non-speculative, ergo Bullish); and, opposable new highs/lows ratios also confirm the buying of large stocks.
One Bullish extreme, rarely cited, is the 52 reading on the UBS Investor Optimism Index, a New low since I've followed it ( 3 years). This could bode well for a big Intermediate term rally later this year. Finally, some other Bullish "tells" are the CBOE put/call ratio at high 74, AAII Bears hitting a huge 44% ( II at 30%), the Nova/Ursa ratio still in a low range at 20, and the Bullish Per cent at a bottoming 52%.

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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SINKO DE MAYO?:

MAYDAY,M'AIDEZ:

Help! Can anyone stop the downward onslaught? April ended with an Income Tax-paying, profit-taking, tape-painting window-dressing cavalcade. At least the sellers stopped, although Volume shows the buyers haven't shown up yet.So far, the most extreme Sentiment reading this week was the Public to Specialist shorting - a huge record-setting 3.67 ratio (if that number is to be believed)- previous 5 year high was 2.57 in August of '04, a Buy point at an Inverse Head & Shoulders re-accumulation pattern (the Head). Sometimes even the IBD can put up a bad number - we'll have to see if other Indicators similarly support this event.
The Investors Intelligence survey shows a recent record high of Bears at 29.7, and odd-lot short sales jumped up, confirming the above Specialist ratio. Another recent record is the U. of Michigan Confidence at 87.7, lowest since Sept. of '03. At 51, the Bullish per cent of stocks on a Buy signal is down 35% from its Dec.31 high - a market top. The AAII (shoeclerks) Bull/Bear survey is inverted - rare, but welcome to bulls - at 29.8/34.7.
May used to be a very good month, at least for the Dow 30 which are large-cap, dividend-paying stocks. Let's hope for at least a short-term rally here as first-of-the-month money comes 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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MAYDAY,M'AIDEZ:

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.

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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.

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THE IDES OF MARCH:

HIGH THERE:

Several Indices hit 4-year highs ( the SPX has retraced 71% of its loss, while a recent - April '03 birthdate- Rydex's ETF, RSP, or equal weighted S&P 500 has hit an all time high). We might assume this Bull is getting tired, and for several good reasons: We are nearing the end of the 6-month seasonally positive cycle with IRA contributions; banging on 11,000 Dow and 2100 Nasdaq; rising oil, declining dollar, employment participation declining with layoffs up 40% year over year, and interest rates climbing. Not only that, astrologists warn of the Bearish April 8 equinox and pullbacks after March's option expiry on the 18th.
Although Barron's Michael Santoli reminds us that at the very top in March '00, the Investors' Intelligence ratio was 53/27, now the Bulls over Bears is 54/22, although that is not exceptionally high, nor are most other Sentiment gauges currently. Momentum seems to be surging with 619 new highs over 57 new lows, 2273 advances in the NYSE over 1225 declines, a nice 62 CBOE Equity put/call ratio and only a small few Indicators nearing overbought conditions: Bullish percent, Rydex Nova/Ursa and the Market Vane survey. We would stay the course and hope for Volume breakouts.

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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HIGH THERE:

STOCKS & COMMODITIES:

During the "Bubble" in the late '90s some analysts equated parabolic Internet stocks to Commodities, as Fundamental Analysts changed their Earnings Growth parameter to "Future Earnings Growth"; now it seems that the stock market is indeed a market of Commodities after all, as the leading Industry Groups lately are Oil, Steel and other Industrial metals, Gold, even Uranium, and as of today, Dr. Copper. Whoever the leaders, the recent rallies - at least of big caps - have again failed at recent high levels again; the best hope would be a higher low and an upthrust to new highs on large Volume provided by M&As reducing shares;add corporate cash and sluggish Bonds, and IRA/Pension money.
The weekly Sentiment Indicators are certainly cooperating, remaining in neutral across the board, except for a Bullish AAII survey reading of 31.8% for both sides.

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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STOCKS & COMMODITIES:

CYCLE-ANALYSIS:

A recent IBD chart illustrated the difference between Buying $10,000 of the DJIA from Nov.1 to Apr.30 ( and switching to Treasuries for the remainder of the year) versus Buying the DJIA from May 1 to Oct.31. The resulting returns over the last 55 years were $492,060 and $9,682 ( or a $318 loss), respectively! Guess what? We're almost there; and the average Bull market of around 3 years is well into the third year, and looking a little tired lately.
The Advance/Decline on the NYSE went negative for the first time in awhile; the complacent VIX is at another new recent low of 11.1; Nasdaq Volume to NYSE is about at parity; but most spectacular of all was the change in the Public to Specialist Shorting ratio down to 1.18, from 1.96 a week ago. This narrow range saw .69 as its 5 year low in March, '00 - a secular top - and a high of 2.58 at last August's low. All other Indicators fall within normal range.

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-ANALYSIS:

FEBRUARY EFFECT:

A delayed "effect" brought us to new highs for the year today, and no Indicators seem to be overextended. In fact, volatility is at recent lows with the VIX at 11.4, the Semis and gold's XAU also benign. Although the Nasdaq has been weak, with techs out of favor, the NAZ Volume rose against the NYSE to 139% last week. Hopefully the upward trend will hold and get us to Walter Bressert's 20-week cycle target of 1260-1320 on the SPX. We also hope that foreigners' reversed reluctance to buy both stocks and bonds last month will get back on track.

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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FEBRUARY EFFECT:

IT'S GOOD TO BE ON THE SAME PAGE,:

but make sure you're also in the same book!
With the Dow's 300-point rise last week, off of the retest of the old Trading Range of '04, most Sentiment Indicators have quieted down for the nonce. The market upswing lulled the VIX to a recent low of 11.2, much like the multi-year low on Volatility on the Gold Index, the XAU, as the Dollar starts to rally thanks to the kindness of foreigners purchasing our Treasuries. Last week's 4:1 NYSE Advance/Decline ratio and 20:1 New Highs/New Lows bode well for a continuance of this direction.

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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IT'S GOOD TO BE ON THE SAME PAGE,:

JANUARY DEFECT:

Even with Monday's big runup of 80 points at the open (reasons being the successful Iraq election -fundamental- and the last day of the month -quantitative- and the aforementioned bounce off the 10,400 Dow Support and 1163 SPX line), we still needed another 300 points today to finish with an UP January ( 40 more on the SPX 500). Still, although the January Barometer has a fairly good track record in up years, not all down Januarys result in a down year!
Sentiment Indicators are echoing the recent bottoming into sideways action (which could result in Accumulation or Redistribution) with so-so levels, except for a couple outliers: for some reason Mutual Fund Cash dropped a huge 10% from 5.5% to 5%, and the AAII survey's Bears again crossed up to 36% vs the Bulls 26%!. All others have fallen into normal range.

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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JANUARY DEFECT:

JANUARY AFTER-EFFECT:

With today's DJIA up 140 after a nasty 42% retracement of the year-end rally (the hedge funds finally took their profits and justified their management), there are hopeful signs that we bounced up off the 10,400 resistance-turned-support level from the 2004 Flag/Trading Range. Although there are no drastic swings in Sentiment readings, there are a few that indicate a cessation of downward momentum: the CBOE put/call hit a Bullish 70% last week; the McClellan Oscillator (ratio-adjusted) is at a relatively low -34; Investor's Intelligence Bears are at 24.7%, highest since the Oct.22 start of the above rally, as is the public shorting to Specialists' level of 2.28. Plenty of cash abounds with mutual fund cash at 5.5% and the Dow 30 dividend yield now up to 4.23% - tempting, with today's low money market rates and new taxation benefits. The AAII (those Fundamental Fellows) Bullish/Bearish ratio is dead even at 33.7% apiece, although it was nicely inverted to 40% Bears last 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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JANUARY AFTER-EFFECT:

STATE OF THE MARKET:

As several of the Indicators come down off their extreme year-end complacent highs (e.g.,605 new highs vs. 35 new lows) - which Fundamental analysts would call year-end position squaring - one stands out immediately: IBD's mutual fund cash jumped up from a steady 5.2% to 5.5% going back to November, a significant Bullish change, coupled with corporate cash of $2T. It appears that the U.S. might be making another paradigm shift in the new millenium from Agrarian to Industrial to Technology now to Financial power as we outsource production to cheaper labor, cut down on capital expenditures in lieu of a softer domestic and global economy. So far since 2000 we have increased our foreign Treasury indebtedness from 30% to 40% and jeopardize that with a weaker dollar.
Another standout Indicator this week is the AAII survey Index which shows a Bullish crossover, with the Bears outnumbering the Bulls 40 to 34%. Hopefully these few Bullish factors will put an end to this January slide until more Indicators line up oversold and predict a positive 5th year.

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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STATE OF THE MARKET:

THE JANUARY EFFECT:

Although many Sentiment Indicators are still near their complacency highs, many have retreated lower, such as the ISEE call/put ratio (160 down from a negative 213), the NAZ Volume vs. the NYSE (149 vs. 169), and the delayed Public/Specialist short ratio (1.59 down from 1.91). As today's market rallies we see hopeful signs in a low McClellan Oscillator of -57, in a bottoming range; and as Michael Santoli reports, and all-time high in the old Odd Lot shorting number, a dinosaur from the past which was superceded by options.
Hopefully this is a retest back down to the top the Trading Range, although the Volume does not confirm this yet. Also provoking caution is the Investors' Intelligence survey of 62.9 Bulls, 20.6 Bears.
Finally, looking back at the Dec.21 column mention of CEFs selling year-end to rise again in January, many are doing nicely and should continue on up - NVX, VCV, NCP, etc.

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 JANUARY EFFECT:

YEAR-END CONDITION:

Once again the Sentiment Indicators warned of an overbought condition in the markets - December's 3rd full week ended with several Indicators at complacent extremes; a few ameliorated during the final week (such as the 2 put/call ratios, the VIX, and a few less advances than declines), but some got even extended moreso: NYSE new highs vs. new lows; and the Nasdaq Volume vs. NYSE Volume, near a 12 month speculative high. The Public is shorting more than the Specialist at 1.91 to 1. After Monday's profit-taking only the fullness of time will reveal the extent of this correction.

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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YEAR-END CONDITION: