HOPES AND FEARS FOR ALL THE YEARS

I've always maintained that the market phrase "Fear and Greed" should be "Fear and Hope" encompassing a wider range of investors. The latest Contrarian hope is that the Dollar is about to rally after its steep decline. A Barron's article posits a 5% Bullish stance on it, although it may retest the low in a late January shakeout. Another seasonal anomaly should be revealed this Thursday as Tom Herschfeld will appear as guest on the Nightly Business Report and tout his Closed-End Fund theory about a selloff at year-end, only to rise sharply in the opening weeks of '05. Muni and Gov't Bond funds are examples: NCP,NCA,MUC, et.al. Barron's Abelson also reports 6 corporate Directors Selling for each one Buying, an often extreme market negative. Longer term, Schwab's Ken Tower reminds us that we are 561 days into a secular Bull market which averages @800 days (mid-November of '05).
More accurate, I've found over 4 years, is the Rydex Nova (bullish) fund vs. Ursa (bearish) ratio which is now quite high at 41. Like most Sentiment Indicators and Technical Oscillators it reflects a majority trend in which the public is correct UNTIL the turning point, so it serves more as a Yellow light. Although the recent Trading Range has quieted down some Indicators, others remain near Bullish extremes (bearish): the VIX at a low 11.95; Investor's Intelligence Bullish % at 62.1 - Bearish at 21.1; Market Vane Bears at 19.2 and Chartcraft's Bullish per cent at a toppy 76. HAPPY HOLIDAYS!

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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HOPES AND FEARS FOR ALL THE YEARS

ADD - AMERICA'S DEFICIT DISORDER:

Even with a record high deficit number sure to slow the Economy, a 5th Fed rate hike, 21 IPOs this week, and a quarterly Quad Witching expiration where institutional traders usually reframe their future positions, Sentiment Indicators still show much complacency. Although a few came off their extreme highs of last week, such as the Nova/Ursa ratio, new highs and advance/declines, NAZ to NYSE Volume ratio - others remain high.Both put/call ratios - CBOE Equity and ISE are extreme (62 Bulls and 259 c/p) Burke's I.I. survey shows Bulls at 60.8%/ Bears at 21.7% and the Bullish percent near its topping point.Previously mentioned Welles Wilder Delta Phenomenon, which forecasts 6 cyclical turning points every 4 years, indicates an upturn @ Dec.15 which tops out mid-April, much like the accepted wisdom of up Dec./Jans and 5th decile year bullishness. Going against that, however, is the 5th rate hike average history of Steve Leuthold, who cites:
7 days: -1.44%; 22 days: -1.12%; 126 days:-5.38%; and 1 yr (252 days): -2.86%

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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ADD - AMERICA'S DEFICIT DISORDER:

HERE COME DA GRINCH

The media has done a great job of selling the public on a smooth and provident Election, plenty of cash in corporate coffers, Holiday and calendar seasonality, etc. -so much that we are approaching a Perfect Storm of a short term Overbought market. What a coincidence that it noticed a newly found Oil supply the same day that the Wall Street institutions (hedgers and futures traders) closed out their books for the year - causing another market booster: a $14 drop in oil price.
That said, 12 of my 15 Sentiment Indicators are at relatively extreme levels, a unanimity seldom reached - and although December is starting out a little toppy, it would be prudent to wait until a decisive Trend is in place before acting. Some of the above extremes are: the ISE sentiment ratio is at a record 299 today, just under the record 304 in January '04 shortly before the secular downtrend; the powerful but unsustainable new high list on the NYSE was 828 to 29 last week; market surveys are at high levels as is the Nova/Ursa ratio of Rydex's Bull and Bear funds. Nasdaq Volume reached 155% of NYSE, also a peak. Insider selling reached a 4-year high, although Specialists' haven't been noticably active yet ( a delayed statistic). It's probably just a Complacency Correction (with corporate and mutual fund cash high) , but - Be careful out there!

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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HERE COME DA GRINCH

THE HERD SHOT 'ROUND THE WORLD:

Contrary Opinion - Today's 100-point loss on the DJIA (probably short-term, year-end profit-taking) is the result of the Overbought state of the Fall runup as reflected in many of our Sentiment Indicators. The most egregious is the ISE Call/Put extreme of 2.25, as well as relatively high levels of the CBOE Equity put/call ratio, the Investor's Intelligence survey of 57% Bulls, and the toppy level of the Bullish percent chart (number of stocks on a Buy signal). That said, there are some Intermediate Term reasons for a continued rally around year-end, if we can analyze them one by one, separating the heuristics from the rational ones: Microsoft's $3 dividend on Dec.2 will be reinvested by Institutions back into other stocks (@$34B). There are lots of losses from this years ho-hum market to be bought in for the Santa Claus/January Effect cycle; M2, corporate cash, and other measures show lots of liquidity although profits and the Economy doesn't forecast too strongly. The Dow's dividend yield is approaching a multi-year high of $4, and Specialist shorting is quiescent. One of the most reliable of sentiment indicators - the Rydex Fynd's Nova versus Ursa ratio (calling 19 of 20 market turns since 2000) is well off its lows at 39, but just as with other Indicators, the levels are only signs of warnings that are not to be acted upon until they have reversed meaningfully. And don't forget the perfect record provided by the 5th year of the Decennial Cycle (11 samples).

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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THE HERD SHOT 'ROUND THE WORLD:

BREAKIN' OUT IS HARD TO DO:

In a Wyckoffian upthrust through the Resistance-becomes-Support level @10,500 DJIA that has harnessed stocks for a 9 months gestation period, we appear to have typically retested that horizontal line and trend upward into the best 2 months of the trading year. The struggling Fundamental forces seem to be a weaker Dollar with higher oil and gas prices going into winter, some trepidation on the part of foreigners to service our huge debt, and an apparent weaker Economy and S&P earnings forecast for '05. On the plus side, besides the seasonality, corporations have huge caches of cash which they refuse to spend on CapEx, so could bolster the stock market through dividends and stock repurchases. Most of MSFT's dividend on Dec. 2 will probably go back into the market.Mutual Fund inflows were $5B last week, and for the first time ETF Volume exceeded that of Mutual Funds, according to Trim Tabs.Sentiment extremes include a huge momentum rally in November (with short covering) with last week's 719 New Highs vs. 26 New Lows on the NYSE; IBD's fund cash remains high at 5.1% and the DJIA dividend rate is 3.93%. The ISE put/call ratio stayed high at 183.
On the overbought side, the McClellan Summation rose to 1105 while the Oscillator went negative and Public/ Specialist shorting lessened. Newsletter surveys showed Market Vane again at 70, with Investor's Intelligence 58% Bulls - only 22% Bears, same as AAII. Finally, the Bullish % is reaching old high levels at 72% of stocks on Buy signals.

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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BREAKIN' OUT IS HARD TO DO:

POST-ELECTION COMMENT - RIGHT,AGAIN - LEFT, BEHIND:

The oversold/Bush rally was to be expected -maybe not as strong as it was. The Dow Industrials went from the throwunder bottom of both the multimonth Trading Range of 9,800-10,400 but also to the top (throwover) of the Bollinger Bands as well. The current retest back into that TR is also indicated by some high levels in Sentiment:The CBOE Equity put/call ratio went from a bullish 79 on Oct.15 to 50 on Nov.5; the ISE p/c also changed from 203 to 129. My cumulative A/D numbers are at record highs, mirroring the high levels of the McClellan Oscillator (51) and Summation (995), ratio-adjusted. 75 and 1,000 seem to be the high limits, respectively. The AAII surveys made a quick trip from 42% Bulls/ 31% bears to 62% Bulls/21% Bears indicating the current retracement. Specialist shorting (always a belated statistic) dropped from 2.34 to 1.77 preceding the rally and speculative Volume (132 NAZ to 100 NYSE), and on the OTCBB, is contrarily high.Only the fullness of time will display whether we can continue upwards in these next 2 provident months and a "5"-year, with a weaker economy and a lame duck President with ugly things to accomplish. Welles Wilder's "amazing" Delta Phenomenon cycle calls for a 12/15/04 bottom running up to a April 15, 2005 peak.

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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POST-ELECTION COMMENT - RIGHT,AGAIN - LEFT, BEHIND:

ELECTILE DYSFUNCTION

As the DJIA closes on Election Day a scant 200 points BELOW the Labor Day level (history shows a 91% chance of Kerry being elected later this evening), we await the returns. In a Contrarian victory, after pundits have recommended Large Cap, Dividend-Paying stocks all year, we find the DJIA, SPX and Nasdaq all down YTD, with Transports, Utilities, S&P Small and Mid- Cap Indicies at multi-year record highs. Although Seasonality points to higher market levels at year-end ( mutual funds have dumped their losers through October), there are a couple clouds on the horizon: the Nova/Ursa ratio climbed above 20 for the first time in several months to 23; the Public/Specialist shorting number at 2.34 is near a 5-year high; and the CBOE Eauity put/call ratio dropped dramatically from a Bullish 77 last week to 59. Short interest still remains large on the SWH software holder, the Energy XLE spider, and the TLT 20-year Treasury. We now await the FOMC results on November 10 (probably the 4th rate hike), then the typical upwave short term and downwave intermediate thereafter.

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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ELECTILE DYSFUNCTION