HOLIDAY ISSUE:

After a positive week heading into the Christmas holiday, not much changed with the exception of these extremes: The AAII ratio of Bulls to Bears jumped mightily with Bulls advancing from 50 to a heady 63%, and the Bears all the way down to 16 from 27%. The other extreme remains the Bullish per cent at a near record 84% of stocks on a BUY signal. Money continues to flow from domestic stock funds, but also MMFs. Possibly buying gold or ETFs. Insider selling jumped higher week over week, even with the 2-year tax cut extension.

This week is the actual Santa Claus rally time, so we shall see if it holds true, with a weak start.

Here are the numbers:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11573	11491	14093	6626
Nasdaq:	2665	2642	2805	1114
S&P 500:	1256	1243	1561	683
CBOE Eq. put/call:	53	50	96-10/08	46-1/03
VIX:	16.5	16.1	90	8.8
McClellan Osc:	15	1	108	(123)
McClellan Sum:	463	411	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	58.8	56.8	63	22.21
InvestorsIntel.Bear:	20.6	20.5	54.4	16
AAII Bull:	63.3	50.2	n/a	n/a
AAII Bear:	16.4	27.1	n/a	n/a
US Equity-1 week lag	n/a	(2.4B)
Money Market Flows	(9.3B)	(33.2B)
Baltic Dry Index:	1999	2000	11700	663
Bullish %:	84	84	88	2
Insider Corporate Sellers:	28:1	19:1	108:1	2.4:1

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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HOLIDAY ISSUE:

(SENTI)-BREADTH-MENT:

Moving into the quiet Holiday period, and hopefully a Santa Claus Rally (bet. Xmas and New Year's) only a couple things stand out:
Volume was high last options expiry week, but the Nasdaq divided by NYSE ratio was low (Bearish); also Bearish FOR the market was the toppy Bullish %, at 84, now near its multi-year high of 88. Domestic Equity mutual fund flows swung dramatically last week (year-end adjusting) from $25B inflows to $33B outflows; as for the Sentiment side, Investor Intelligence Bulls crept even higher, above 50%.

For readers who have followed my recent DITM (deep-in-the-money covered call option strategy), they can do so at http://ditmcalls.blogspot.com and read about my recent trade earning an ANNUALIZED 21.4% on Mattel. It's a new variation on a theme capturing annual dividends with the calls, rather than quarterly.

Here are the numbers for last week - Happy Holidays to all:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11491	11410	14093	6626
Nasdaq:	2642	2637	2805	1114
S&P 500:	1243	1240	1561	683
CBOE Eq. put/call:	50	46	96-10/08	46-1/03
VIX:	16.1	17.6	90	8.8
McClellan Osc:	1	9	108	(123)
McClellan Sum:	411	436	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	56.8	56.2	63	22.21
InvestorsIntel.Bear:	20.5	21.3	54.4	16
AAII Bull:	50.2	53.0	n/a	n/a
AAII Bear:	27.1	22.6	n/a	n/a
US Equity-1 week lag	n/a	(2.7B)
Money Market Flows	(33.2B)	25.3B
Baltic Dry Index:	2000	2111	11700	663
Bullish %:	84	82	88	2
Insider Corporate Sellers:	19:1	38:1	108:1	2.4:1

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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(SENTI)-BREADTH-MENT:

ORANGE ALERT - CAUTION!!!:

After summing up a decade of this column's Weekly Sentiment Indicators, the strongest ones decided to show off their strength last week by exhibiting the most Bearish (FOR the market, not ON the market) in years. As reported elsewhere (AAII newsletter, Barron's) the surveys were at exaggerated extremes; the CBOE put/call ratio and VIX both slid to recent lows (complacency); even CEO Insider Selling has been huge, although that is almost a contrary indicator, judging from 3 or 4 recent periods. The new Nasdaq/NYSE Volume ratio even went low, showing a non-speculative feeling, even as the market surges on with unanimous crowd support and historic yearend bullishness.
Here are the numbers for last week:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11410	11382	14093	6626
Nasdaq:	2637	2591	2805	1114
S&P 500:	1240	1224	1561	683
CBOE Eq. put/call:	46	53	96-10/08	46-1/03
VIX:	17.6	18.0	90	8.8
McClellan Osc:	9	14	108	(123)
McClellan Sum:	436	421	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	56.2	55.4	63	22.21
InvestorsIntel.Bear:	21.3	21.8	54.4	16
AAII Bull:	53.0	49.7	n/a	n/a
AAII Bear:	22.6	26.2	n/a	n/a
US Equity-1 week lag	n/a	(1.8B)
Money Market Flows	25.3B	(3.2B)
Baltic Dry Index:	2111	2096	11700	663
Bullish %:	82	79	88	2
Insider Corporate Sellers:	38:1	34:1	108:1	2.4:1

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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ORANGE ALERT - CAUTION!!!:

DECEMBER RALLY?:

December is usually a good month for the market and it seems that this year may be no exception; however, several Sentiment Indicators are flashing at least corrective warnings: the Bullish % is closing in on record highs, the market surveys are too complacent, and the coincident VIX is lying in a low range.

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11382	11092	14093	6626
Nasdaq:	2591	2534	2805	1114
S&P 500:	1224	1189	1561	683
CBOE Eq. put/call:	53	61	96-10/08	46-1/03
VIX:	18.0	22.2	90	8.8
McClellan Osc:	14	(29)	108	(123)
McClellan Sum:	421	501	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	55.4	55.7	63	22.21
InvestorsIntel.Bear:	21.8	21.6	54.4	16
AAII Bull:	49.7	47.4	n/a	n/a
AAII Bear:	26.2	24.7	n/a	n/a
US Equity-1 week lag	n/a	(2.6B)
Money Market Flows	(3.2B)	15.4B
Baltic Dry Index:	2096	2170	11700	663
Bullish %:	79	77	88	2
Insider Corporate Sellers:	34:1	55:1	108:1	2.4:1

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 RALLY?:

MARKET TOPS:

A couple of anecdotal market topping Indicators surfaced last week, too vague to be useful, however: the first was the higher incidence of large IPOs occurring at market tops over the past 10 years (e.g. GM). The other was the percentage of Harvard MBAs that migrated to Wall St after graduating - 30% was the previous top - now at 32%.

In the upcoming TSAA Review, of which I am the Editor, I am writing a piece on success, or lack of, market top Indicators over the past 3 years. During that time there were 7 reversals, tops and bottoms. The Review will contain the whole study, and will be sent out to members, with the TSAASF.ORG site carrying it at a later time.

The CBOE Equity put/call ratio was one of the most consistent, with the highs (fear-based occurring at bottoms) ranging from mid-60s to mid-90s; Lows were mid-40s to mid-60s on a weekly basis.

Another Indicator  with much success was the McClellan Oscillator (adjusted), which was mostly negative before oversold bottoms - higher at tops. Also among the best forecasters were the two surveys that I follow: Investors' Intelligence and AAII Bull/Bear ratios. These were especially effective when inverted (more Bears than Bulls).

Last but not least was the Bullish % -stocks on a Buy signal- which designated overbought and oversold conditions quite well.

Here are last week's numbers:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11092	11203	14093	6626
Nasdaq:	2534	2518	2805	1114
S&P 500:	1189	1199	1561	683
CBOE Eq. put/call:	61	59	96-10/08	46-1/03
VIX:	22.2	18.0	90	8.8
McClellan Osc:	(29)	(20)	108	(123)
McClellan Sum:	501	608	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	55.7	56.2	63	22.21
InvestorsIntel.Bear:	21.6	20.2	54.4	16
AAII Bull:	47.4	40.0	n/a	n/a
AAII Bear:	24.7	32.5	n/a	n/a
US Equity-1 week lag	n/a	(2.8B)
Money Market Flows	15.4B	(4.1B)
Baltic Dry Index:	2170	2164	11700	663
Bullish %:	77	76	88	2
Insider Corporate Sellers:	55:1	34:1	108:1	2.4:1

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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MARKET TOPS:

CAPITALISM OR CAPITOL-ISM?:

GM (Government Motors) may have been the Evil of Two Lessers, and was a partial success, especially to Warren Buffet who praised it and the UAW who benefited more than bond and stock holders. In his classic book - Against The Gods -  the late Peter Bernstein posits that while geniuses were prevalent before the end of the Middle Ages (Euclid, Da Vinci, et.al), neither the Hindus and Arabs, who gave us our numbering system discovered Capitalism, or the use of Risk and Probabilities in society. Thanks to Leonardo Fibonacci (nee Pisano) and later Pascal and Fermat, civilization started using them, with the help of the printing press, resulting in exponential advances. The main reason  was that earlier societies were comfortable with the status quo, and reliance on their gods for Fate and Risk - much like cradle to grave governing has a tendency to do these days.

Like all things organic (humans, vegetation, corporations, governments, and societies) unless modified, the growth cycle and aging eventually result in destruction - death, bankruptcies, revolutions.

Although last week's volatility did not show up in the final unchanged market levels, there was not much change in the Sentiment Indicators. Standouts include AAII Bulls dropping from a high 57.6% to only 40 - the Investors' Intelligence Bulls, however, increased from 48 to 56, while their Bears dropped to a low 20%; Insider Selling dropped to still a high 34:1.

Here are the numbers:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11203	11192	14093	6626
Nasdaq:	2518	2518	2805	1114
S&P 500:	1199	1199	1561	683
CBOE Eq. put/call:	59	57	96-10/08	46-1/03
VIX:	18.0	20.6	90	8.8
McClellan Osc:	(20)	(54)	108	(123)
McClellan Sum:	608	868	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	56.2	48.4	63	22.21
InvestorsIntel.Bear:	20.2	23.1	54.4	16
AAII Bull:	40.0	57.6	n/a	n/a
AAII Bear:	32.5	28.5	n/a	n/a
US Equity-1 week lag	n/a	(.7B)
Money Market Flows	(4.1B)	2.2B
Baltic Dry Index:	2164	24540	11700	663
Bullish %:	76	77	88	2
Insider Corporate Sellers:	34:1	79:1	108:1	2.4:1

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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CAPITALISM OR CAPITOL-ISM?:

HU'S ON FIRST?:

A leading magazine last week reported the Chinese Premier displaced Obama as the number 1 powerful figure in the world, to paraphrase Abbott and Costello's famous debate - this is the biggest "first" since the U.S sent Rice (Condoleezza) to China.

After a weak week in the markets, the G20 meetings seem to have reversed most of their directions, Sentiment is inconclusive: the McClellan Oscillator swung mightily from a +35 to minus 57 (oversold), yet the AAII Bulls went to a new multi-year high of 57%. Insider selling is huge , for 4 out of the past 5 weeks, although they were exactly wrong last time it exceeded 100:1 in April of '09, before the long rally.

I'm testing a variation of a new indicator -speculation- based on dividing Nasdaq Volume by NYSE, since 53% of the latter is now interest-rate type securities, whereas Nasdaq is more of the market. High readings are Bullish.

Here are last week's numbers:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11192	11444	14093	6626
Nasdaq:	2518	2578	2805	1114
S&P 500:	1199	1225	1561	683
CBOE Eq. put/call:	57	51	96-10/08	46-1/03
VIX:	20.6	18.3	90	8.8
McClellan Osc:	(54)	35	108	(123)
McClellan Sum:	868	931	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	48.4	46.7	63	22.21
InvestorsIntel.Bear:	23.1	24.4	54.4	16
AAII Bull:	57.6	48.2	n/a	n/a
AAII Bear:	28.5	29.8	n/a	n/a
US Equity-1 week lag	n/a	(1.1B)
Money Market Flows	2.2B	(6.6B)
Baltic Dry Index:	2454	2600	11700	663
Bullish %:	77	79	88	2
Insider Corporate Sellers:	79:1	60:1	108:1	2.4:1

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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HU'S ON FIRST?:

DEAL OF THE (NEW) CENTURY:

As with so many events in this "Recession", this weekend's TSAA mega-seminar has not yet sold out all the seats, so a continued "discounted" fee is available through Saturday - including TSAA membership for 2011. You can see details at http://tsaasf.org.

This exceptionally diverse technical symposium includes Greg Morris (long time partner of John Murphy/Stockcharts); Tim Knight - founder of prophet.net website; Barbara Rockefeller - veteran currency trader; and Edwards/Magee editor and technician extraordinaire - Charles Bassetti. Plus lots of food during the all-day event on Saturday. You can email: hpruden@ggu.edu.

This QE2 rally is not dead yet, as shown by a record 770 new highs on the NYSE last week; but it is getting overcooked by a few Sentiment Indicators: the Bullish % is just under 80; the McClellan Summation Index just under 1,000. Newsletter Bears and CBOE put/call ratios have warned lately, but bounced back last week. Insider selling is still huge, although they were totally wrong last time they sold; money is still coming out of stock funds and Money Market funds.

Here are the numbers:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11444	11118	14093	6626
Nasdaq:	2578	2507	2805	1114
S&P 500:	1225	1183	1561	683
CBOE Eq. put/call:	51	61	96-10/08	46-1/03
VIX:	18.3	21.2	90	8.8
McClellan Osc:	35	(14)	108	(123)
McClellan Sum:	931	859	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	46.7	45.6	63	22.21
InvestorsIntel.Bear:	24.4	24.4	54.4	16
AAII Bull:	48.2	51.2	n/a	n/a
AAII Bear:	29.8	21.6	n/a	n/a
US Equity-1 week lag	n/a	(.2B)
Money Market Flows	(6.6B)	24.6B
Baltic Dry Index:	2600	2678	11700	663
Bullish %:	79	74	88	2
Insider Corporate Sellers:	60:1	104:1	108:1	2.4:1

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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DEAL OF THE (NEW) CENTURY:

FORTUNATE CORRECTION:

My EIX (Edison) DITM position was called away on October 12, when I was away on vacation. I naturally assumed it was just prior to ex-dividend; it was a pleasant surprise to receive an additional dividend of $63 which was from an ex-D in late September.

So my annualized return for the 4 month holding was 9%, not 6.1%.
Although Utilities pay high dividends, their options are not that attractive for selling calls, nor is this a great environment for the Sector. Telecoms are better - VZ, T.

Standard and Poor's reports that for the decade just past, stocks' dividends comprised 84% of Total Return. Morningstar has an attractive rating for EXC -Exelon, and Leggett -LEG.

I'm anxiously awaiting the Fed's decision on QEII.later today.

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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FORTUNATE CORRECTION:

TEA (PARTY ANIMAL):

About the only thing we haven't heard from the media prior to Election Day is what to call the TEA Party: we have the Elephants and Asses, but no mascot yet for Taxed Enough Already, or Independents. As Autumn Leaves (and Winter Arrives), still no answer on the previous tax breaks due to expire. Much has been discussed - CNBC aptly named the possibility of taxing church property "APPRAISE THE LORD !". So far this young Century Congress has changed the tax structure 6 times - a headache for estate planners and tax preparers.

Although I've always thought that the stock market should be a non-"prophet" organization, technicians know we can learn from history: Pre-election years, per Ned Davis Research, have averaged 17.6% over several decades (think 2011); while a distant second is Election year at +9.5%. The best months also lie ahead - November, December and January. NDR also cites years where capital gains are hiked only rise 6.1%, vs a normal 8% (19.5% when CG are cut). Best market gains also occur with a Democratic President and Republican Congress (9.6%).

That said, some alarming Sentiment statistics occurred this past week: the AAII Bears % was the lowest since December 15 of 2006 at 20.6%, although the major top did not occur until Oct.'07 -10 months later. Previous low was 19.1% in January '06 at 19.1%, only 4 months before a minor correction. And the Bulls breached the 50% mark as well.

Another startling fact was Insider (CEO) Selling, reaching an almost record high of 104:1 over Buying, up from 28:1 the week before. Then I realized that the record of 108:1 occurred in April '09, at the beginning of the 1,000 points of "light" in the stock market - who says corporate insiders know what their companies are doing?

Here are the numbers:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11118	11132	14093	6626
Nasdaq:	2507	2479	2805	1114
S&P 500:	1183	1183	1561	683
CBOE Eq. put/call:	61	67	96-10/08	46-1/03
VIX:	21.2	18.8	90	8.8
McClellan Osc:	(14)	(1)	108	(123)
McClellan Sum:	859	923	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	45.6	45.1	63	22.21
InvestorsIntel.Bear:	24.4	22.0	54.4	16
AAII Bull:	51.2	49.6	n/a	n/a
AAII Bear:	21.6	25.2	n/a	n/a
US Equity-1 week lag	n/a	(.2B)
Money Market Flows	(24.6B)	(17.0B)
Baltic Dry Index:	2678	2720	11700	663
Bullish %:	74	731	88	2
Insider Corporate Sellers:	104:1	28:1	108:1	2.4:1

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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TEA (PARTY ANIMAL):

HOW TWEET IT IS:

It appears that the next hi-tech breakthrough in Sentiment is based on Twitter analysis - for further research, see opinionfinder.com. If there is a way to quantify this for the market, it may be the next one to be added to the list of Indicators.

Until then, however, we have to rely on the old stodgy ones - this week saw the near record high Insider Sellers (of 93 to 1) fall back to a still high 28 Sellers to Buyers by CEOs, et.al.; Inv.Intell. Bears was the lowest since the FlashCrash week of May 7. And while my cumulative A/D total is at another record level, it has slowed down - the Bullish % of stocks on a Buy signal is also in dangerously high territory, at 73%.   Although the VIX is at its lowest since just before aforementioned FlashCrash (breaking below the 19 level), the CBOE Equity put/call ratio zoomed up to 67 from 52. Mutual funds lost a high number of $$, at $17B (doh).

Since a few people who follow my DITM strategy ( a low-risk covered call plan to replace zero rates), I have started a "sister" blog on which I have not only placed 2009 and 2010 (YTD) favorable results when annualized, but shall continue to update as stocks get called away, or options rolled out. The blog is called: http://ditmcalls.blogspot.com, if you choose to follow it. If the reader wants to be e-mailed on updates, they can request it from my at brentleonard59@gmail.com, since it will be sporadic, not weekly as the Sentiment blog is.

Here are the Sentiment numbers for last week:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11132	11062	14093	6626
Nasdaq:	2479	2468	2805	1114
S&P 500:	1183	1176	1561	683
CBOE Eq. put/call:	67	52	96-10/08	46-1/03
VIX:	18.8	19.0	90	8.8
McClellan Osc:	(1)	(1)	108	(123)
McClellan Sum:	923	952	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	45.1	47.2	63	22.21
InvestorsIntel.Bear:	22.0	24.7	54.4	16
AAII Bull:	49.6	47.1	n/a	n/a
AAII Bear:	25.2	26.8	n/a	n/a
US Equity-1 week lag	n/a	(.6B)
Money Market Flows	(17.0B)	(5.8B)
Baltic Dry Index:	2720	2769	11700	663
Bullish %:	73	71	88	2
Insider Corporate Sellers:	28:1	93:1	108:1	2.4:1

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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HOW TWEET IT IS:

QE II OR THE TITANIC?:

The real question is, how effective will the forthcoming Fed easing be - the only tool they have left to stem the economic decline? The Fed buys Treasuries and MBS, which provides cash for banks, corporations and other institutions, hedgers and the public, who turn around with an interest rate carry trade and buy Treasuries (10 to 1 over stocks), or invest in other countries that are business-friendlier, or buy back stock and raise dividends.

In a Contrarian's Delight, several asset classes have been on a tear this Fall, with stocks ignoring the worst seasonal slumps (so far), the dollar crashing, bonds metals rising to record levels.

Was option expiry week the end of these moves or just a breather? We are also coming into the best seasonal 3-month period; pre-election (2011) year is the best of the 4-year cycle (per J.P.Morgan's quarterly report, year 3 has averaged 16.6% since 1940, with year 4 a distant second at 8.4%). And the upcoming election bodes well for stocks.

Morgan's report also states there is $9.4T in CASH (M1-2, Institutions, public) gathering zero interest as of August 2010. But Sentiment readings are not what Bull markets are made of:

The McClellan Summation is close to +1,000 and the Bullish % of stocks is over 70%; high numbers of outflows occurred in MMFs and equity mutual funds.

Corporate Insider Selling jumped last week to 93:1 over Buying - I know colleges are expensive but not that much (the usual suspect)!

After an enthusiastic reception to a talk on my DITM covered call strategy last week at the Silicon Valley Option Group in Santa Clara, I've decided to start a "sister" blog: http://ditmcalls.blogspot.com. I have posted my actual trading results and annualized returns from 2009, 2010 YTD, and will update as stocks are called away or sold. Although I hope for double-digit gains annualized ( since it also offers a very good safety net, cash is not an option), option volatility is touching a low 18, as measured by the VIX last week, versus a 95 during the 07-08 slump. Downturns in a stock or market will raise that considerably.

Even high single-digit returns with only a danger of a Bear market loss is certainly worth looking into:

Morgan's statistics show since 1990 - Inflation was 2.8%; average investor gains (mostly mutual funds) 2.3%; homes 3.2%; Gold 5.2%, bonds 7%; and S&P stocks 8.2%.

Here are last week's numbers:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11062	11006	14093	6626
Nasdaq:	2468	2401	2805	1114
S&P 500:	1176	1165	1561	683
CBOE Eq. put/call:	52	61	96-10/08	46-1/03
VIX:	19.0	20.7	90	8.8
McClellan Osc:	(1)	21	108	(123)
McClellan Sum:	952	866	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	47.2	45.6	63	22.21
InvestorsIntel.Bear:	24.7	28.3	54.4	16
AAII Bull:	47.1	49.0	n/a	n/a
AAII Bear:	26.8	27.7	n/a	n/a
US Equity-1 week lag	n/a	(5.6B)
Money Market Flows	(5.8B)	(.5B)
Baltic Dry Index:	2769	2696	11700	663
Bullish %:	71	68	88	2
Insider Corporate Sellers:	93:1	21:1	108:1	2.4:1

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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QE II OR THE TITANIC?:

WE'RE "IN-THE-MONEY":

The Post-Depression Song title also serves as the slogan for my favorite Investing Strategy for the Post-Recession era: the Deep-In-The Money covered call strategy that has been extensively tested over a year and a half to not only approach double-digit returns, but more importantly, is a defensive hedge against all but a severe Bear Market.

This coming Wednesday, Oct.13, I shall be giving a talk to the Silicon Valley Option Group at the Embassy Suites (near Great American Parkway) in San Jose, for those who are interested in learning more about it.

In an earlier blog I opined that too much media hype might reverse the Sept. jinx, although the reliable 4-year Kinchin/Presidential cycle bottom in October is still a possibility, before entering the positive year-end time of year. Providing further impetus is the large number of underperforming mutual funds and hedgehogs that need to catch up by year-end.

Volume remains week, as does the VIX, now just above 20; breadth remains very strong - breaking my cumulative A/D total every week. This allows put buyers to hedge more cheaply, as the put/call ratio is now high at 61. Both the Bullish% and newsletter surveys are showing complacency.

Here are last weeks numbers:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	11006	10829	14093	6626
Nasdaq:	2401	2370	2805	1114
S&P 500:	1165	1146	1561	683
CBOE Eq. put/call:	61	57	96-10/08	46-1/03
VIX:	20.7	22.5	90	8.8
McClellan Osc:	21	21	108	(123)
McClellan Sum:	866	n/a	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	45.6	43.3	63	22.21
InvestorsIntel.Bear:	28.3	27.8	54.4	16
AAII Bull:	49.0	42.5	n/a	n/a
AAII Bear:	27.7	31.6	n/a	n/a
US Equity-1 week lag	n/a	(4.1B)
Money Market Flows	(.5B)	n/a
Baltic Dry Index:	2696	n/a	11700	663
Bullish %:	68	n/a	88	2
Insider Corporate Sellers:	21:1	n/a	108:1	2.4:1

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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WE'RE "IN-THE-MONEY":

EARLY EDITION:

Since I am leaving for a two-week vacation tomorrow, Sentiment results are effective Thursday (as if Friday were a Holiday).Still complacent, but backing off a bit, the AAII Bull/Bear numbers (out on Wednesdays of each week) were 45 to 25.4%; the Inv.Intell., out on Tues.., were not updated yet.
Thursday closes were slightly higher than the week before.
Mutual funds flows were still Outflows - $3.6B with a week lag of data. Bullish % climbed to 62%, getting a bit overbought.

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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EARLY EDITION:

DANCING WITH THE TSARS:

DIS-Appointment?: Apparently recent Presidents believe that they can bypass Congress by setting up unvoted-on offices, such as Liz Warren's new position. Although she may be a brilliant and dedicated person, the idea of more gov't is grist for the Constitutionalists' Mill.
Autumn leaves may turn to Tea leaves in November.
Meanwhile, nothing upsets the market's proclivity to undermine the September curse (so far) - October may be a different animal. Volume, which, for some reason is never tracked on CNBC,Bloomie, got back to normal last week, thanks to option expiry, which is also rarely mentioned as having an effect on markets.
Most Sentiment Indicators were benign, with the exception of the AAII Bull/Bear ratio, which comes out on Wednesdays - it flashed a 50.9% Bulls, which is getting complacent - while the complementary Bears dropped 7% to 24.3.
Corporate (legal) Insider Selling jumped by a factor of 6 times the total of 2 weeks ago. MMF flows also leapt from $10B Inflow to a negative $25B outflow - most likely to Emerging markets and fixed income.
Here are the numbers:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	10607	10462	14093	6626
Nasdaq:	2315	2242	2805	1114
S&P 500:	1125	1109	1561	683
CBOE Eq. put/call:	57	61	96-10/08	46-1/03
VIX:	22.0	22.0	90	8.8
McClellan Osc:	25	43	108	(123)
McClellan Sum:	695	502	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	36.7	33.3	63	22.21
InvestorsIntel.Bear:	31.1	32.2	54.4	16
AAII Bull:	50.9	43.9	n/a	n/a
AAII Bear:	24.3	31.6	n/a	n/a
Nova/Ursa Mutual Funds:	n/a	n/a	2.2	0.56
US Equity-1 week lag	n/a	(2.2B)
Money Market Flows	(24.6B)	10.6B
ETF equity:Monthly Totals	n/a	n/a	n/a
Baltic Dry Index:	2737	2995	11700	663
Bullish %:	57	52	88	2
Insider Corporate Sellers:	32:1	21:1	108:1	2.4:1

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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DANCING WITH THE TSARS:

Thank Goodness It's Fall!:

Contrarian's Delight - Media hype is that September (and October) are the worst times for stocks. So far...so good. On the worst Volume and smallest indices moves in awhile - Sentiment Indicators were jumping all around last week, as we approached the top of the 1025-1125 S&P500 Trading Range.
Thanks to Labor Day and Rosh Hashana, trading was weak, but mostly positive.
My cumulative A/D went to another new high, as did NYSE new highs - much of which are bond-like securities (Pfds, CEFs, ETFs); but the Nasdaq new hi's/lo's inverted positive.
Newsletter surveys went Bearish FOR the market, especially the AAII ratio.
And CEO Insider Selling quadrupled to 21:1, but exchanges Short Interest shot up @5%.
The BDI, or Baltic Dry Index, a proxy for the global economy, hit a 3-month high, as did the WIP, the World Inflation Index.
Finally, large numbers of $$ flowed out of domestic equity mutual funds and into MMFs.

After next week I shall be vacationing with family in SoCal, so the blog will be temporarily interrupted.
When returning, I have been invited to speak to the Silicon Valley Option Group on Oct.13, at the San Jose Embassy Suites, and also a Marin investor group.
Topic will be my DITM, or Deep-In-The-Money option strategy which has performed very well in this economy - I shall also be starting a new blog citing the actual trading results since its inception in 2009: very close to the historic 100-year stock market average of 10%, when markets are now still at 1998 levels!
Here are a couple of recent results with opening date, Symbol and Total Net Return :
7/14/2010 PFE 19.07%
10/29/09 DD 8.70%
2/26/10 MRK 11.4%

And here are the Sentiment Indicators:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	10462	10447	14093	6626
Nasdaq:	2242	2133	2805	1114
S&P 500:	1109	1104	1561	683
CBOE Eq. put/call:	61	58	96-10/08	46-1/03
VIX:	22.0	21.3	90	8.8
McClellan Osc:	43	48	108	(123)
McClellan Sum:	502	376	1568	(1514)
Newsletter Surveys
InvestorsIntel.Bull:	33.3	29.4	63	22.21
InvestorsIntel.Bear:	32.2	37.7	54.4	16
AAII Bull:	43.9	30.8	n/a	n/a
AAII Bear:	31.6	42.2	n/a	n/a
Nova/Ursa Mutual Funds:	n/a	n/a	2.2	0.56
US Equity-1 week lag	n/a	(7.6B)
Money Market Flows	10.6B	(6.2B)
ETF equity:Monthly Totals	n/a	n/a	n/a
Baltic Dry Index:	2995	2835	11700	663
Bullish %:	52	49	88	2
Insider Corporate Sellers:	21:1	5:1	108:1	2.4:1

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 Goodness It's Fall!: