ZUGZWANG- "FORCED MOVE":

In chess, the optimal strategy is to put your opponent into a position in which they can only make one move each time, forcing them into checkmate. In today's markets, the combination of hedge fund and mutual fund redemptions, margin calls, mutual fund tax loss selling, 401k and pension withdrawals and shorting has driven most all the Sentiment Indicators to extremely oversold levels, yet, just as with oscillators, they can stay that way indefinitely.
One only hopes that with the end of the (ugliest) month, the election relief, year-end seasonality, and the DJIA approaching several multi-year support levels, we have seen a Selling Climax and the entry into a Wyckoff-type Trading Range.
For those interested in this, there appears to be only a few spaces left for next weekend's TSAA Annual Seminar on Wyckoff -www.tsaasf.org. -to register.

Some of these Indicator extremes include the VIX at record highs (actually touching 90), CBOE put/call ratios in the 80s; new highs to new lows at incredible 7 to 1000; Bullish percent at 8, after hitting a recent 2% of stocks on buy signals (probably inverse ETFs). Also at record levels - McClellan figures and Investors Intelligence Bears.
Also Bullish FOR the market - public vs. Specialist shorting is quite high and Insider Selling is very low. See below:

MktSentiment. 10/24/2008 Prev. Week.....5Yr.HI......LOW

DJIA ………. 8378…………8852………..14093............7286
Nasdaq………. 1552…………1711…………2810.............1114
S&P500…….. 876………….940………….1561………..776
CBOE Eq. put/call …83……..……..83…….…..96-10/08….....46-1/03

VIX ………. 79nh………….70nh…….…….79..-10/08bull….10.0-7/05 bear

McClellan Osc………-38…………..25……………..91 -5 /04 bear...(-100)-10/08bull
McClelSum……….…-1514nl…….-1500nl……..…....1568-6/03.......-1514-10/08
Newsletter Surveys:
Inv.Intel -Bull:…..…22.2nl……….22.4nl……….…63 (12/04bear)......22.2-10/08bull
Bear:………… 54.4nh……..52.9…..………… 54.4.10/08.......16-6/03

AAII-Bull/Bear ……38.7/38.7……40.9/39.8..……..n/a n/a
Public/NYSE Spec.-…22nh………14.1… …….……22-10/08…………14.1
Bullish%- ………8……………18………….…88 -2/04bear.....2-10/08bull
*Insider corporate sellers.4:1……..7:1 …. ………..97………….4-10/08
Mutual Fund Inflows 200M…….(14.2B)…
ETF InflowsL……….500M…….4.3B……
Money Market Inflows: .17B……..58B… ………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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ZUGZWANG- "FORCED MOVE":

FACE THE "BARRON'S" WASTE:

After returning from the San Diego area, where a Barron's copy is as rare as a home buyer, I've finally sifted through several issues and 100+ e-mails to update the Sentiment picture.
If the recent indicators are not climactic, I don't know what are - the Bullish per cent, based on number of stocks on Buy signals, reached a record +2!; the McClellan Summation hit -1500 while its concomitant Oscillator dropped to -100 at one point; finally, the VIX hit an intraday record high of 85.
There are probably several reasons for stocks circling the drain, foremost among them are the Sept. redemptions from the 8,000 hedge funds, the seasonal Oct. lows, which normally end in rallies, especially with a non-incumbent election on the horizon, with the Nov.-Jan. optimal market window to follow. On top of these is the mutual fund selling, larger than last January's huge market selloff of $13B for the week. This is also the time of year that these mutual funds do their tax loss selling.
Both the crashes of 1834 and 1929 saw "Echo" busts within a decade (1973's and 1987's were a milder echo as the economy wasn't as much in jeopardy) , so the current downturn was not exactly a Black Swan.
Although Barron's reports many insiders actually buying their companys' stock, others, such as in housing, etc. are getting margin calls to liquidate. Stocks such as GM, etc. that fall below $5 are no longer marginable and must be paid in full, like an option.
To wrap up, although many indicators were climactic, they can remain in the zone, much like oversold oscillators, until other technical indicators forecast a move up or down out of the new accumulation or re-distribution trading range.
Here are the numbers for the past two weeks, plus the 5-year highs and lows:
MktSentiment. 10/17/2008 Prev. Week.....5Yr.HI......LOW

DJIA ………. 8852…………8451………..14093............7286
Nasdaq………. 1711…………1649…………2810.............1114
S&P500…….. 940…………..899………….1561………..776
CBOE Eq. put/call …83…………..96nh……..…..96-10/08….....46-1/03

VIX ………. 70………….70nh…….…….70..-10/08bull….10.0-7/05 bear

McClellan Osc………25……….-100……………..91 -5 /04 bear...(-100)-10/08bull
McClelSum……….…-1500nl……-1200……..…....1568-6/03.......-1500
Newsletter Surveys:
Inv.Intel -Bull:…..…22.4nl………25.3 ……….…63 (12/04bear)......22.4-10/08bull
Bear:………… 52.9………..53nh…..………… 53.10/08.......16-6/03

AAII-Bull/Bear ……40.9/39.8…..31.5/60.8..……..n/a n/a
Public/NYSE Spec.-…14.1………15… …….……18.5…………14.1
Bullish%- ………18…………2nl………….…88 -2/04bear.....2-10/08bull
*Insider corporate sellers.7:1……n/a…. ………..97………….4
Mutual Fund Inflows (14.2B)……(9.4B)
ETF InflowsL……….4.3B………3.8B……
Money Market Inflows: .58B…….47B… ………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

Subscribe in a reader

FACE THE "BARRON'S" WASTE: