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

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DONALD C. DELUTIS: R.I.P