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.