SO GOOD, SO FAR!:

Despite the oft-publicized warning that September is the cruelest month for stocks, the Election Year projections from Ned Davis Research that I've been writing about here and the Examiner column: 

http://www.examiner.com/stock-market-in-san-francisco/brent-leonard, have been right on. 

according to it, however, next week is the critical market juncture. Of the 28 EYs from 1900, if the Incumbent is to win, or the summation of all EYs (including termed out), the market will keep rising, with bumps, of course. The U.S. fiscal year (not cliff) ends this month, the election, Euro, etc. can produce volatility.

Sentiment indicators are issuing an overbought warning for now, hopefully just a sideways move. Facts such as the End of Quarter rebalancing by institutions, put/call ratio, bullish per cent, even newsletter surveys show caution.  Last week the CEO Insider Selling was 42:1 after hitting a high of 78 :1 the week before. Last week selling brought the McClellan Oscillator near zero, but the cum. Summation is way high at 888. NYSE new lows to highs were almost 20:1 again. 

Awhile back Arch Crawford, who trained at Merrill Lynch under Bob Farrell, but relies a lot on alignment of stars, points out the current Vernal Equinox as a climactic moment for stocks.

Here are the results from last week:

 

Date>		9/21/2012	9/14/2012
Indices:	DJIA	13579	13593
	NAZ	3179	3183
	SPX	1460	1465
WklyVolume (Bshs).
NASD/NYSE		9.2/4.4	8.6/3.6
Specul.Ratio hi=bullish		2.09	2.39
nasd/nyse
Sentiment:	put/call-CBOE	64	56
VIX>50-alltmlow=8.8		13.98	14.5
Advance/Dec-NYSE..		1371/1768	2317/837
Weekly Net:		-397	1480
Cumulative:		143061	143458
Weekly	NYSE hi/low	505/32	722/36
New Hi's/Low's	Nasdaq h/l	332/74	403/81
McClellan	Oscillator	4	63
McClellan Sum	.+750/-1000	888	820
Newsletter	Inv.Intel -Bull:tues	54.2	51.1
Surveys	Bear:-5yrs	24.5	25.5
	AAII  -Bull :wed.	37.5	36.5
	Bear	33.8	33
COT:Change w/w	large/small (net)k	9/22.	5/5.
CEOinsider	selling	42:1	78:1
3-box rev	Bullish%-	79	79
US equity -ICI	Fund Flows	1 wk lag	(2.8B)
MMF flows	Change in $B	(10.3B)	8B
MargDebt- top (300M)	monthly		277B
ETF:Eqty/Int'l/Bond	million$$ .		702/264/226
2-yr Tsy Yield: Inflation		0.27%	0.26%

COMMENCEMENT AT "SUGAR" HIGH:

Far be it for me to try to fall into the trap of timing the stock market, however, I have more confidence that markets behave more irrationally due to Sentiment and human behavior than pure random walking ( although that does exist very short term).

That said, several yellow caution signs appeared after the Bernanke put rally of last week that causes me to be cautious near term. Technically, it appears that a 5% correction would be possible and healthy, with the rally resuming into year end. As mentioned before, the Election year model since 1900 (an average of 28 election cycles) points to a down to flat market if the incumbent is destined to lose.

Here are my concerns: Barron's columnists Michael Santoli and Steven Sears both point to Larry McMillan's put/call ratio levels calling for a correction. Since the QE3 put option Implied Volatility (IV) is lower than it was in 2007, before the financial meltdown. A very tight inverse correlation between the SPX and equity put/call is seen in Barron's looking like last April. 

For several weeks my CEO insider selling ratio has skyrocketed (over buys) as shown below - doubling w/w; in fact, CEOs leaving office is up 25%, possibly avoiding the Fiscal Cliff. Especially healthcare and financials. Both Bernanke and Draghi seem to be desperate: "whatever it takes".

Elsewhere, the NYSE new highs/lows was a huge 722/36 (more than 20:1); speculative Volume (Nasdaq over NYSE) is still high. newsletter surveys were mild, but they come out Tuesday and Wednesday - before the big Fed runup. Finally, both the Bullish % and McClellan Oscillator are flashing warning/toppy signs - even the McClellan Summation aggregate.

Here are the numbers:

Date>		9/14/2012	9/7/2012
Indices:	DJIA	13593	13306
	NAZ	3183	3136
	SPX	1465	1437
WklyVolume (Bshs).
NASD/NYSE		8.6/3.6	6.6/2.7
Specul.Ratio hi=bullish		2.39	2.44
nasd/nyse
Sentiment:	put/call-CBOE	56	62
VIX>50-alltmlow=8.8		14.5	14.4
Advance/Dec-NYSE..		2317/837	2445/678
Weekly Net:		1480	1767
Cumulative:		143458	141978
Weekly	NYSE hi/low	722/36	520/58
New Hi's/Low's	Nasdaq h/l	403/81	293/86
McClellan	Oscillator	63	35
McClellan Sum	.+750/-1000	820	616
Newsletter	Inv.Intel -Bull:tues	51.1	51
Surveys	Bear:-5yrs	25.5	24.5
	AAII  -Bull :wed.	36.5	33.1
	Bear	33	33.1
COT:Change w/w	large/small (net)k	5/5.	(2)/3
CEOinsider	selling	78:1	34:1
3-box rev	Bullish%-	79	74
US equity -ICI	Fund Flows	1 wk lag	(2.8B)
MMF flows	Change in $B	8B	(.8B)
MargDebt- top (300M)	monthly	277B	JULY:
ETF:Eqty/Int'l/Bond	million$$ .	702/264/226	JULY:
2-yr Tsy Yield: Inflation		0.26%	0.26%

BACK TO NORMAL:

Summer's over and the crazy season starts, especially in an election year. The Election Year model for September is off to a raging start - according to it, October will let us know who is to win the next Presidency.
The Indicators have settled back to the middle again, not enough for a reversal yet, but Caution. The Inv. Intell. Bull/Bear survey is getting stretched, and the AAII one is exactly even. Breadth is strong, with the McClellan Oscillator approaching the +50 level (my sell signal) - it is now at +35.
Here are the numbers.

Date>		9/7/2012	8/31/2012
Indices:	DJIA	13306	13090
	NAZ	3136	3066
	SPX	1437	1406
WklyVolume (Bshs).
NASD/NYSE		6.6/2.7	6.6/2.8
Specul.Ratio hi=bullish		2.44	2.36
nasd/nyse
Sentiment:	put/call-CBOE	62	72
VIX>50-alltmlow=8.8		14.4	17.4
Advance/Dec-NYSE..		2445/678	1693/1437
Weekly Net:		1767	256
Cumulative:		141978	140211
Weekly	NYSE hi/low	520/58	323/61
New Hi's/Low's	Nasdaq h/l	293/86	163/87
McClellan	Oscillator	35	-5
McClellan Sum	.+750/-1000	616	558
Newsletter	Inv.Intel -Bull:tues	51	48.9
Surveys	Bear:-5yrs	24.5	24.5
	AAII  -Bull :wed.	33.1	34.7
	Bear	33.1	32.6
COT:Change w/w	large/small (net)k	(2)/3	1/1.
CEOinsider	selling	34:1	110:1
BalticDryIndex	GlobalEcon		discont.
3-box rev	Bullish%-	74	71
US equity -ICI	Fund Flows	(3.7B)	1 wk lag
MMF flows	Change in $B	(.8B)	(2.6B)
MargDebt- top (300M)	monthly	JULY:	277B
ETF:Eqty/Int'l/Bond	million$$ .	JULY:	702/264/226
2-yr Tsy Yield: Inflation		0.26%	0.23%

SEPTEMBER SONG:

Now that the Dog Days of Summer are over with Labor Day, coupled with some critical upcoming meetings and events, stocks should see more Volatility - hopefully Volume as well. Last week's Indicators are mostly benign with a few standouts:
Insider (legal) Selling was high at 110 to 1; yet the CBOE equity put/call ratio hit 72, showing fear. Breadth, as measured by new highs/lows and advances/declines, still is positive - Volume is speculative with Nasdaq high versus NYSE.
 For more on September's direction guess see -
http://www.examiner.com/stock-market-in-san-francisco/brent-leonard

Here are the numbers:

Date>		8/31/2012	8/23/12**
Indices:	DJIA	13090	13057
	NAZ	3066	3053
	SPX	1406	1402
NASD/NYSE	WklyVolume (Bshs).	6.6/2.8	n/a
nasd/nyse	Specul.Ratio hi=bullish	2.36	n/a
Sentiment:	put/call-CBOE	72	67
Barron's	VIX>50-alltmlow=8.8	17.4	15.1
	Advance/Dec-NYSE..	1693/1437	n/a
	Weekly Net:	256	n/a
	Cumulative:	140211	n/a
Weekly	NYSE hi/low	323/61	n/a
New Hi's/Low's	Nasdaq h/l	163/87	n/a
McClellan	Oscillator	-5	-9
McClellan Sum	.+750/-1000	558	667
Newsletter	Inv.Intel -Bull:tues	48.9	47.3
Surveys	Bear:-5yrs	24.5	24.7
	AAII  -Bull :wed.	34.7	42
	Bear	32.6	25.9
COT:Change w/w	large/small (net)k	1/1.	n/a
CEOinsider	selling	110:1	n/a
BalticDryIndex	GlobalEcon	discont.	discont.
3-box rev	Bullish%-	71	70
US equity -ICI	Fund Flows	1 wk lag	(4.5B)
MMF flows	Change in $B	(2.6B)	0
MargDebt- top (300M)	monthly	JULY:	277B
ETF:Eqty/Int'l/Bond	million$$ .	JULY:	702/264/226
2-yr Tsy Yield: Inflation		0.23%	n/a