THANK GOD IT'S (SEPT.) OVER:

Traditionally September is the worst month of the year for the stock market (Dec. and Jan. being the best), and this year was no exception. With the Gov't's fiscal year ending, some hedge funds investors seeing the lockup window close to exit their fund, end-of-quarter window dressing, and individual investors espying their 401ks and brokerage statements, we also have this crisis megabill for congress to pass.
After screwing up the Postal Service, Medicare, Social Security, and Welfare, we give them this problem to solve.
The most recent hammer was banning short sales, although short interest has been declining since its peak of 18.6B shares on July 25 of this year. Mutual fund redemptions are the greatest since Jan.'08. NY lows/highs were 15:1 last week, despite the short selling ban on financials, etc. Meanwhile, money market funds suffered a rare $1B decline after the record $144B inflow the previous week. This reflects a shift of the entire $143B from general MM to Treasury MMs.
Here are two Behavioral items to ponder: Paulson gives a high number (an Anchor) just as a salesman does, so that the settle number doesn't seems so bad; on the other hand, a contractor gives a bid for a project (especially in government work) which doubles or triples by the time the "unforeseen" unfolds.
Surprisingly, other than the VIX touching 40, most other Sentiment measures have regressed to the mild mean, unlike the markets.

For the first time in 5 years, I shall be taking a short vacation to southern Calif. and will be away from my data sources, so this blog will be interrupted for 2-3 weeks.

Here are last weeks numbers:

MktSentiment. 9/25/2008 Prev. Week.....5Yr.HI......LOW

DJIA ………. 11143………11388………..14093............7286
Nasdaq………. 2183…………2273…………2810.............1114
S&P500…….. 1213…………1255………….1561………..776
CBOE Eq. put/call …72……………83……………..92-1/08….....46-1/03

VIX ………. 34.7…………32.0…….…….44… 9/02 bull..10.0-7/05 bear

McClellan Osc………-24………….4……………..91 -5 /04 bear...(-81)-5/04bull
McClelSum……….…-597……..-451……..…....1568-6/03.......-1187
Newsletter Surveys:
Inv.Intel -Bull:…..…37.5……….37.9……….…63 (12/04bear)......35-6/06bull
Bear:………… 40.9………43.7…..………… 38.2-3/03.......16-6/03

AAII-Bull/Bear ……34/45.7……27.2/54.4……..n/a n/a
Public/NYSE Spec.-…16.8……..18.5…….……18.5
Bullish%- ………43sell…….53buy………….…88 -2/04bear.....19bull
*Insider corporate sellers.12:1…..20:1………..97………….4
Mutual Fund Inflows..(9.3B)……(3.9B)…)……
ETF InflowsL……….23.2B……...8.3B……
Money Market Inflows: (1B)……144B…

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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THANK GOD IT'S (SEPT.) OVER:

I'M EVEN, I'M LEAVIN':

This market is difficult enough to analyze/trade without the Gov't "necessarily" stepping in to complicate things. This said, it is doubtful that Sentiment can correctly reflect or predict short term direction when these Deus ex Machina backstops intervene.
First, some salient observations: in June, after a sharp decline, the Pakistani stock market banned shortselling; there was a huge rally, then the decline resumed about an equal distance from the prior leg. How long this "time out" lasts is moot, but, as Louise Yamada points out, more downside beckons. My Point & Figure counts show a descent to 9500 or, breaking that, 8600 DJIA.
In addition to today's large decline (even sans short sellers), foreigners have been repatriating funds from long, short Treasuries and GSEs in force, even since the summer months. Money market funds (before Hank guaranteed them) lost a record $144B vs. a previous week's Inflow of $44B to safety(?). Ironically, the person who invented the first MMF was also the first recently to close it, besotten with Lehman paper.
Anyway, it's comforting to know that the U.S. financial system is now in the hands of the Federal Government that brought us the Postal System, Welfare, Social Security and Medicare.
Despite the massive volatility, the numbers are quite benign - the indices barely changed week over week; put/call went from 86 to 83, although the VIX shot up over 40, closing at 32- so far this year each toppy spike has been Bullish.
Public shorts (until the halt) rose to 18:1 over Specialists, who should be able to short; the SDS (SPX short ETF) weekly Volume was a record 243B . Finally, the surveys, which missed much of the action by reporting on Tuesday, are still Bullishly inverted, with Bears dominating.

MktSentiment. 9/19/2008 Prev. Week.....5Yr.HI......LOW

DJIA ………. 11388……….11421………..14093............7286
Nasdaq………. 2273…………2261…………2810.............1114
S&P500…….. 1255…………1251………….1561………..776
CBOE Eq. put/call …83……………86……………..92-1/08….....46-1/03

VIX ………. 32.0…………25.6…….…….44… 9/02 bull..10.0-7/05 bear

McClellan Osc………4….………-6……………..91 -5 /04 bear...(-81)-5/04bull
McClelSum……….…-451………-237……..…....1568-6/03.......-1187
Newsletter Surveys:
Inv.Intel -Bull:…..…37.9………..38.2……….…63 (12/04bear)......35-6/06bull
Bear:………… 43.7……….41.6…..………… 38.2-3/03.......16-6/03

AAII-Bull/Bear ……27.2/54.4……29.3/54.9……..n/a n/a
Public/NYSE Spec.-…18.5……….15.3…….……18.5
Bullish%- ………53buy…………..46………….…88 -2/04bear.....19bull
*Insider corporate sellers.20:1……..15:1………..97………….4
Mutual Fund Inflows..(3.9B)………(6.5B)……
ETF InflowsL………..8.3B………..7B……
Money Market Inflows: (144B)…….44.4B

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 EVEN, I'M LEAVIN':

SHATTERED GLASS/STEAGAL:

Once again, Congress, in its inimitable circular firing squad fashion, has done what the 9/11 terrorists could not do - help bring down the capitalist system - first by eliminating the wall between gunslinging investment banks and real banks, whose explicit FDIC guarantee let widows and orphans sleep well at night. Now B of A is buying Merrill Lynch. Then they, and other chickencoop SelfRewardingOrgs abandoned the uptick rule and mandated that mortgage lenders stop "redlining" neighborhoods where police would not even go. No wonder one of the internet Dictionary's definitions of Congress is "sexual intercourse".
Despite the Fear and Loathing brought on by the weekend, Sentiment numbers look surprisingly Bullish - comparing them to my infamous rally call on July 14: the SPX is 12 points away from that summer rally inception; the CBOE put/call ratio is actually 1 pt. higher now at 86 (huge); the VIX, at 25.6 is less than 2 pts. away; the Inv.Intell. survey is still inverted in favor of Bears (rare), and the AAII is almost as bad at 29 vs. 54. Birinyi bloggers, which I sometimes follow, showed a 65 to 21 bear/bull ratio.
Finally, the SDS, which is the short S&P500 ETF, saw weekly Volume not seen since that week in July, and Money Market Funds increased by a large $45B ( they always miss rallies!).
Here are the stats:

MktSentiment. 9/11/2008 Prev. Week.....5Yr.HI......LOW

DJIA ………. 11421………11220………..14093............7286
Nasdaq………. 2261…………2255…………2810.............1114
S&P500…….. 1251…………1242………….1561………..776
CBOE Eq. put/call …86……………73……………..92-1/08….....46-1/03

VIX ………. 25.6………….23.0…….…….44… 9/02 bull..10.0-7/05 bear

McClellan Osc……….-6……………2……………91-5/04 bear...(-81)-5/04bull
McClelSum……….…-237………..-195…………..1568-6/03.......-1187
Newsletter Surveys:
Inv.Intel -Bull:…..…38.2………….37.8……….…63 (12/04bear)......35-6/06bull
Bear:………… 41.6…………40.0…..………… 38.2-3/03.......16-6/03

AAII-Bull/Bear ……29.3/54.9……37.0/43.2……..n/a n/a
Public/NYSE Spec.-…15.3…………17.3…….….
Bullish%- ………46……………45SELL………….…88 -2/04bear.....19bull
*Insider corporate sellers.15:1…….14:1………..97………….4
Mutual Fund Inflows..(6.5B)………..L(.4B
ETF InflowsL………..7B…………5.1B
Money Market Inflows: 44.4B…….19.3B

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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SHATTERED GLASS/STEAGAL:

THE OPEC (OPAQUE IN FRENCH) "PUT":

The oil group, in its upcoming meeting, threatens to cut supply and keep oil price at $100/bbl or above. In Barron's last week, Charles Maxwell calls for $300 oil in a few years. If so, the slide so beneficial to the economy would end, creating more universal hardship on consumers everywhere. The Baltic Dry Index, a good indicator of global economic growth is hitting new lows - it can be seen at http://www.investmenttools.com/, select BDI.
Also hitting new yearly lows, per Standard and Poors' technician Mark Arbeter's call in the current TSAA Review, is the Utility Index -whatever that may portend.
The DJIA's tessatura, or range, seems to ever widen, with a 350 down day last week and a fizzling 350 up day today based on the gov't bailout. Both the CBOE put/call ratio and VIX rose last week, (noticably puts on banks), though not yet to extremes.
In newsletter surveys, the AAII remained inverted, while the Inv.Intell. Bulls also fell under the Bear number - and the public shorting rose against Specialists - both sets Bullish.
On the downside, Bullish per cent went on a Sell signal - 54 to 45% of stocks on a buy signal - although false whipsaws do happen about once a year for the past 5 years.
Here are the actual numbers:

MktSentiment. 9/4/2008 Prev. Week.....5Yr.HI......LOW

DJIA ………. 11220……….11543………..14093............7286
Nasdaq………. 2255…………2367…………2810.............1114
S&P500…….. 1242………….1282………….1561………..776
CBOE Eq. put/call …73…………….71……………..92-1/08….....46-1/03

VIX ………. 23.0…………..20.6…….…….44… 9/02 bull..10.0-7/05 bear

McClellan Osc……….2……………40……………91-5/04 bear...(-81)-5/04bull
McClelSum……….…-195……….-275…………..1568-6/03.......-1187
Newsletter Surveys:
Inv.Intel -Bull:…..…37.8…………39.3……….…63 (12/04bear)......35-6/06bull
Bear:………… 40.0…………39.3…..………… 38.2-3/03.......16-6/03

AAII-Bull/Bear ……37.0/43.2……30.7/45.5……..n/a n/a
Public/NYSE Spec.-…17.3…………14.6…….….
Bullish%- ………45SELL………54………….…88 -2/04bear.....19bull
*Insider corporate sellers.14:1……22:1………..97………….4
Mutual Fund InflowsL(.4B)…….. (1.2B)
ETF InflowsL………..5.1B………..(2.5B)
Money Market Inflows: 19.3B…..(3.8B)

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 OPEC (OPAQUE IN FRENCH) "PUT":

QUANTUM SHIFT:

If anyone doubts that hedge funds/institutions rule the equities markets, versus long term mutual funds and value investors, today's round trip of nearly 400 Dow points should negate any Fundamental "fair"value model. The best, biggest and brightest of the 8,000 or so hedge funds that had their worst fund ever in July, are shaking markets intraday at rare 2% swings more and more commonly. Profit-taking from the several directional momentum plays of summer - gold, silver, energy, coal, etc. reared its ugly head as vacationers returned to the fray.
Among the sentiment indicators followed here, the Insider Trading, at 22:1, was the largest since the June swoon, and the McClellan Oscillator last week broke up through the +50 level to return to 40 by week end, possibly foretelling a short term overbought market.
Money flowed out of mutual funds, ETFs and Money Market funds, possibly to buy things (school, etc.), domestically and globally. The AAII Bulls midweek did show fear in reversing their complacency -see below:
MktSentiment. 8/29/2008 Prev. Week.....5Yr.HI......LOW

DJIA ………. 11543……….11628………..14093............7286
Nasdaq………. 2367…………2414…………2810.............1114
S&P500…….. 1282…………1292………….1561………..776
CBOE Eq. put/call …71…………….70……………..92-1/08….....46-1/03

VIX ………. 20.6………….18.8…….…….44… 9/02 bull..10.0-7/05 bear

McClellan Osc……….40…………17……………91-5/04 bear...(-81)-5/04bull
McClelSum……….…-275………-405…………..1568-6/03.......-1187
Newsletter Surveys:
Inv.Intel -Bull:…..…39.3…………40.7……….…63 (12/04bear)......35-6/06bull
Bear:………… 39.3…………38.4…..………… 38.2-3/03.......16-6/03

AAII-Bull/Bear ……30.7/45.5……38.1/37.3……..n/a n/a
IBD: Short Interest- na…………….na…………15.0………. 4.0
Public/NYSE Spec.-…14.6………..15.6…….….
Bullish%- ………54………….…50………….…88 -2/04br.....19bu
*Insider corporate sellers.22:1…….18:1………..97………….4
Mutual Fund Inflows: (1.2B)……..(.5B)
ETF InflowsL..(2.5B)…………..(.7B)
Money Market Inflows: (3.8B)……2B

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

Subscribe in a reader

QUANTUM SHIFT: