SENTIMENTAL JOURNAL:

Stock market volume remains weak, especially UP volume, a danger signal. Other negative indications are Nasdaq New Highs less than Lows, and a McClellan Oscillator at a dangerous +79 from last week's strong rally.

Also on the bear side, the Insider Selling ratio has been shooting up vs. Buying - from 9:1 three weeks ago, to 32:1 the next; last week was a startling 56:1. On the plus side, the AAII Bears rose to a 45% level, vs. 32.2% Bulls - a reliable signal.

With HFT (high frequency traders) churning 70% of the NYSE volume, the public still remains out of the market on balance, although MMFs have also seen outflows - probably paying bills and other necessities.

For those of you who asked about the DITM, my Deep-In-The-Money covered call investment strategy, read on:

I still feel it is THE optimal strategy in this Trading Range market environment, and have the statistics to back it up. After real live testing of several hundred thousand $$ and 15 to 20 positions for over a year in all kinds of markets, it remains stronger than most all alternatives, plus the added benefit of a safety net up to 10%. Even with this summers 16% decline from April, almost all positions are above water.

In 2009, from its inception in May, just the CLOSED positions returned an annualized 10.77% (stocks called away prematurely returned over 18% annualized due to the early call of stocks).
Average annualized return for Q1 of 2010 was 10.6%.
Whereas hedge funds had the worst return for Q2 in a decade, per Barron's magazine.
For the first 6 months of 2010 just ended, due to a couple "plungers" -BP and UVV, which I could have handled better, DITM still barley had a positive return of 0.2% (which was 8% better than the S&P 500). And these were just the closed trades and losses - other stocks had calls rolled out in time, keeping the stock.
By laddering positions monthly one diversifies not only market risk, but enjoys monthly dividend payments.

To sum up, DITM is a great place to put a portion of one's assets, requiring little monitoring or market knowledge. Gaining 1% on short term rates becomes negative after paying taxes, a weakening dollar's buying power, and Inflation.

To learn more about this strategy, please see: http:/brentleonard.com

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	10424	10097	14093	6626
Nasdaq:	2269	2179	2805	1114
S&P 500:	1102	1064	1561	683
CBOE Eq. put/call:	56	62	96-10/08	46-1/03
VIX:	23.5	26.3	90	8.8
McClellan Osc:	79	7	108	-123
McClellan Sum:	219	-15	1568	-1514
Newsletter Surveys
InvestorsIntel.Bull:	35.6	32.6	63	22.21
InvestorsIntel.Bear:	35.6	34.8	54.4	16
AAII Bull:	32.4	39.4	n/a	n/a
AAII Bear:	45	37.8	n/a	n/a
Nova/Ursa Mutual Funds:	n/a	n/a	2.2	0.56
US Equity-1 week lag	n/a	(3.1B)
Money Market Flows	(18B)	(13B)
ETF equity:Monthly Totals	Apr.831B	Mar.805B
Baltic Dry Index:	1940	2280	11700	663
Bullish %:	40	53	88	2
Insider Corporate Sellers:	56:1	32:1	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

Subscribe in a reader

SENTIMENTAL JOURNAL:

SEMI-ANNUAL REPORT:

With the wild first half of 2010 behind us, let us hope for a more sane market, although a couple reasons for it not to happen is the seasonality - over the past 57 years to 2008 $10k invested in stocks from November to April earned $578k, while the complementary 6 months actually saw a loss to $341. One other reason, brought to my attention by George Chen, who runs the S.F. Options Group, that Mars is going to be closer to the Earth than any time in recorded history in August, about the same size as the Moon!

The S.F. Bay Area Option Group meets this Saturday at Fort Mason, 9 a.m. - I'll be giving a talk on Pt. & Fig. charts -formation and forecast; Andrew Watson will talk on the VIX.

Indicators of note last week were the AAII Bears, at a very high level of 57 (Bullish FOR the market); the BDI, or Baltic Dry Index and Bullish per cent are at very low levels, and $18B went IN to MMFs last week - going for that high, zero % yield.

Speaking of Zero [as in my book Zero (In)Tolerance] , those of you who follow the DITM, or deep-in-the-money covered calls strategy, the results are in for 6 months:

Although the positive .4% annualized return - thanks to a couple plungers of BP and UVV - was disappointing to date, it still outperformed the minus 7.6% of the S&P 500 by 8%. Hopefully the second half will raise the bar. This strategy, of selling call option BELOW the Buy price of dividend stocks, is a defensive plan, optimal in a sideways to down market, as well as a money market alternative for a portion of assets. More at www.brentleonard.com

Finally, I'm attaching to my email list a compilation of 2010 predictions for your viewing pleasure. Technicians Rule !

Last week numbers are posted -

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

SEMI-ANNUAL REPORT:

DONALD C. DELUTIS: R.I.P

As I mentioned in last week's blog, it is only fitting that the weekly writing of this compilation of Sentiment Indicators come to an end this Holiday weekend - the e-mail alert list will end (unless anyone wants to request that I alert them whenever reliable extreme conditions present themselves that overcome HFT trading and government interventions).

I would like to dedicate this final edition to my close and long-time friend, Donald C. DeLutis, who passed away due to a heart attack this past weekend while pursuing his passion - a senior basketball senior tournament in Oregon- at the age of 76. Don was a 50-year veteran of the investment world, advising President Reagan and British Royalty, as well as private clients such as Bob Prechter and Charles Schwab. Over the 45 years that I knew him, he made many outlandish predictions, most of which came true, due to his high level connections. Over the years he talked about his mentor, a market maker on Wall St.., who's lifelong job was to disseminate misinformation for the "they" (read Composite Operator) who controlled the market. He and I most recently attended a luncheon at the Marines' Memorial for David Petraeus. Don was a loyal, generous, and religious man who was rightly concerned about the future of this country. May he finally rest in peace !

After 5-plus years of mainly presenting various Sentiment Indicators, a topic on which I received my Chartered Market Technician designation in 1995, I have decided to morph the column into a more expanded, informational opus, with other technical and market opinions based on my 25 years of observations and studies. It also includes eclectic ideas from voluminous readings and TV viewings - mostly from the moderate Conservative perspective.

To further state my case, I believe that Right is "right" and Left should be "left" to those countries that, according to F.A.Hayek and other Austrian economists, have never made socialism work very well for any length of time. He cites Corporal Adolph Hitler and his military buddies in 1909 who started the National Socialist party, or NAZIs. The dictionary even defines "siniestra" as -on my left - going back to the times when left-handed persons (such as our current President) were in strong disfavor.

Look for this experiment in misplaced and expensive altruistic behavior to end in a few months - probably when the market is due to end its seasonal malaise towards yearend. The promised "Change" to Level the Playing Field has certainly occurred in the recent stock market, and will eventually take place in bonds and gold, as well.

Turning to the market. The present environment looks quite grim, with the 200-day moving average broken, the huge support that everyone is now following - 1030-40 on the S&P 500 has been broken. I had hoped that the end-of-quarter would spell some relief; over the past 10 years the first day of the month has gained more than the rest of the month combined - that failed, and so far the Holiday weekend, usually a positive event, is not holding true.

Semi-Annual strategy: in the 6 months from Nov. thru Apr $10,000 rose to $578,413 in 57 years; the complementary 6-month period saw a loss of the $10k to $341! If you use a MACD oscillator or histogram to time exit and entry, this result even tripled that.

So what is the reason(s) for this recent "Death Spiral" in the market? The usual correction following a runup?

As far as typical retracements go - a Gann 33% correction of the recent 80% rally would have been 1036 on the SPX; a Fibonacci 38.2% would give us 1010, which is very close to last week's low. A 50% retracement would bring the SPX down to 950.

There also seems to be some support between these levels from the summer of '09 and the fall of '08. Finally, Pt.& Fig. counts can give a maximum retracement of either 880 or even 760 (if the computers take over and the circuit breakers don't break).

Could it be Congress's FinReg? The financial regulation bill coinciding in time with the market's downturn? As Barron's points out, this toothless attempt to de-Risk a Risky market was mostly innuendo and cosmetic.

How about the potential for large tax hikes and not renewing Bush's tax cuts in 2011 and 2013? Judging from the best guess by experts on the coming elections, Republicans will retake 36 House seats and 6 Senate seats, causing gridlock if not fear of much reprisal for these.

Fears of Europe's weakness or a U.S. double-dip Recession are not too likely. With unemployment high, U.S. population aging, 401Ks down, estimates are that the savings rate will top 10% by 2015, up from 4% now. But low rates should help Securities.

It is very rare that both the days before and after a Holiday are down, especially the 4th, which comes at the first of the month - Tuesday we are seeing a snapback rally, at least for now!

Finally, I'd like to comment on the DITM (deep-in-the-money) covered call strategy on which I wrote a book this year - Zero (In)Tolerance from Amazon. Despite this 16%, unusually strong correction (to date), it is still continuing to act well, with many positions that I hold and manage still "above water", with others just below. The latter I hope to have recover while they received dividends and option decay.

With no riskfree alternative to zero interest rates and a dismal future for the economy and market for the near future, this still seems to be the optimal strategy to combat taxes and Inflation. The occasional "plungers", such as BP and UVV Corp. can be offset by many other positions netting double digit returns with less risk than the overall market, due to the safety net of a lower call sold against the stock.

For those interested in DITM, you can go to www.brentleonard.com - I have a "starter" quarterly advisory service that presents as many stock Buy Writes as needed each quarter for the novice or underconfident, until they are ready to solo.

Here are the Sentiment numbers from last week:

MktSentiment	Last Week	Prev. Week	5 Yr HI	5 Yr LOW
DJIA:	10741	10624	14093	6626
Nasdaq:	2374	2367	2805	1114
S&P 500:	1159	1150	1561	683
CBOE Eq. put/call:	54	50	96-10/08	46-1/03
VIX:	17.0	17.6	90	8.8
McClellan Osc:	-1	51	108	-100
McClellan Sum:	1264	1109	1568	-1514
Newsletter Surveys
InvestorsIntel.Bull:	46.1	44.9	63	22.21
InvestorsIntel.Bear:	21.3	23.6	54.4	16
AAII Bull:	35.4	45.3	n/a	n/a
AAII Bear:	29.9	25.3	n/a	n/a
Nova/Ursa Mutual Funds:	0.66	0.6	2.2	0.56
US Equity-1 week lag	n/a	1.4B
Money Market Flows	-74B	-36.2B
ETF equity:Monthly Totals	Jan.731B	Dec.777B
Baltic Dry Index:	3379	3316	11700	663
Bullish %:	82	80	88	2
Insider Corporate Sellers:	27:1	48:1	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

Subscribe in a reader

DONALD C. DELUTIS: R.I.P