THE BLACK SWAN:

Not the Australian wine, but an excellent book by Nassim Taleb about improbable events. Its 3 characteristics are: it is unpredictable, it has massive impact, and, most of all, looks very logical after the fact - examples are the Crash of '87, 9/11, the success of Google, and the past two weeks, when I have been on vacation without access to Barron's, IBD, CNBC, and e-mail.
After recouping 3 weeks of statistics, the following shows a high probability of the downturn occurring, even despite the expected mid-October cycle.
Here are some indications which lit the caution light in early October: the ISE call/put index hit a near high 164; the A/D on the NYSE was 2600 to 900, with further speculation from new highs/lows at 500 to 70. The McClellan Oscillator hit @ +50 and the Inv.Intell. Bulls reached 60 to 21 Bears; Nasdaq Volume to NY was a recent high of 179 and CEO insider selling rose to 43:1. Record amounts went into Money Market funds, and the IBD short interest rose to a record 8.95.
Here are last weeks stats:

Mktsentiment. 10/19 /2007 Last Week..... .5Yr.HI...... LOW

DJIA ………. 13522……….14093…………14093..............7286
Nasdaq………. 2725…………2805……….. 2805.............1114
S&P500…….. 1500…………1561…………1561………..776
CBOE Eq. put/call …65……………58……………91…..........46-1/03

VIX ………. 22.9…………17.7…………….44.. 9/02........10.0-7/05

ISEE-call/put ……. 122……………164……………177………..118
All Equities (ETF)
McClel Osc…………-56……………12………91-5/04.........(81)-5/04
McClelSum………440………………280…………..1568-6/03.......(917)

Newsletter Surveys:
Inv.Intel -Bull:…..…. 62…………60.2………..62.9-12/04......35-6/06
Bear:………… 19.6………….21.5………… 38.2-3/03.......16-6/03

AAII-Bull/Bear ……42.0/35.7……..54.6/25.8……..n/a n/a
MarketVane Bulls….65……………69…………. 74..............24
UBS investor confidence..68……….73………178……………53
(monthly change)
IBD: Short Interest- …8.76……..8.95nh….……8.95………. 4.0
Public/NYSE Spec.-….7.88…..…7.89…..……18.25……….1.0
Birinyi Blogger
Bull/Bear Poll ………50./33.3…….…36/40
Bullish%- ……….62……………...80……….…88 -2/04...... 46-8/04
*Insider corporate sellers..43:1………na
Sectors: Most Buyers: none
Most Sellers: healthcare

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 BLACK SWAN: