MARKET SENTIMENT **************** Last weekend, I wrote about the set-up in the Dow Jones Industrial Average ($INDU) and Nasdaq-100 (NDX.X). Unfortunately, all did not go as planned. I was looking for a rebound in the INDU and NDX this week, but that rebound took place a bit too early as measured by price. The INDU and NDX both rebounded Monday well above their respective support levels that I set forth in the weekend column. Meanwhile, both of their daily Stochastics readings crossed over and to the upside Tuesday morning. Close, but close doesn't make you money. I'll get the next one, just you wait. Sentimental Observations "There's nothing to fear but fear itself." I don't know if President Roosevelt was big on implied volatility, but I think he'd be proud of the market's reaction to recent reports of anthrax discoveries. Funny thing is that the Market Volatility Index (VIX.X) and Nasdaq-100 Volatility Index (VXN.X) have been falling in the face of perceived fears over anthrax. Remember, the market is omniscient, the media is not! I'm still weighing whether or not the recent drop-off in put/call ratios is a product of October expiration. I think it is. Kind of funny how the volatility (fear) measures fall in synch with put/call ratios, isn't it? But, I did notice a spike in the QQQs' put/call ratio Tuesday... The INDU is still on Bull Confirmed - the strongest of point & figure buy signals - on its bullish percent chart, although it did lose 3 percent Tuesday because of SBC Communication's (NYSE:SBC) triple bottom breakdown. Meanwhile, the NYSE Composite ($BPNYA) and S&P 500 ($BPSPX.X) bullish percent readings climbed higher. Over on the Nasdaq-100 ($BPNDX), it remained in Bull Correction mode, which is indicative of longs taking profits. The ARMS Index (INDEX:TRIN), also known as the TRIN, only works at extreme levels. The ARMS Index is not at extreme levels. The internals of the market worsened Tuesday, with decliners outpacing the advancers on both the NYSE and Nasdaq markets. Also, new lows continued to outpace new highs, but that's nothing new. When the new high/new low line makes a significant turn, it could indicate the beginning of a new bull market. Hey, did anybody notice that S&P commercial traders positioned to their most bullish levels of the year last week? I did. I wonder if those commercial interests are getting longer this week? ----------------------------------------------------------------- Market Volatility VIX 33.19 VXN 63.73 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.58 703,978 408,869 Equity Only 0.50 645,688 323,581 OEX 1.62 6,593 10,687 QQQ 0.89 32,252 28,698 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 28 + 1 Bull Alert NASDAQ-100 59 + 2 Bull Correction DOW 50 - 3 Bull Confirmed S&P 500 44 + 1 Bull Alert S&P 100 40 - 2 Bull Alert Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-Day Arms Index 1.16 10-Day Arms Index 1.02 21-Day Arms Index 1.03 55-Day Arms Index 1.22 Extreme readings above 1.5 are bullish, and readings below .85 are bearish. These signals don't occur often and tend be early, but when the do, they can signal significant market turning points. ----------------------------------------------------------------- Advancers Decliners NYSE 1522 1591 NASDAQ 1679 1913 New Highs New Lows NYSE 45 48 NASDAQ 44 55 Volume (in millions) NYSE 1,314 NASDAQ 1,817 ----------------------------------------------------------------- Commitments Of Traders Report: 10/16/01 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 Commercial interests continued to posture to increasingly bullish levels last week. While still net bearish, the % of open interest is approaching 0. The positioning of small traders last week neither confirmed nor refuted what commercial traders did, as small traders were relatively flat week-over-week. Commercials Long Short Net % Of OI 10/05/01 365,200 408,567 (43,367) (5.6%) 10/12/01 369,049 407,804 (38,755) (4.9%) 10/16/01 378,866 415,289 (36,423) (4.5%) Most bearish reading of the year: (111,956) - 3/6/01 Most bullish reading of the year: ( 36,423) - 10/16/01 Small Traders Long Short Net % of OI 10/05/01 124,249 73,882 50,367 25.4% 10/12/01 122,292 74,539 47,753 24.0% 10/16/01 124,568 73,779 50,789 25.4% Most bearish reading of the year: 36,513 - 5/01/01 Most bullish reading of the year: 91,122 - 3/06/01 NASDAQ-100 Commercial traders grew slightly more bullish last week from the week ago period as measured by a slight drop in % of open interest currently short. Still, they remain decidedly bearish while small traders grew more emboldened last week and added about 1,000 long positions while short interest dropped among small traders. Commercials Long Short Net % of OI 10/05/01 26,703 37,669 (10,966) (17.0%) 10/12/01 24,662 38,020 (13,358) (21.4%) 10/16/01 27,398 40,397 (12,999) (19.2%) Most bearish reading of the year: (15,521) - 3/13/01 Most bullish reading of the year: (1,825) - 1/02/01 Small Traders Long Short Net % of OI 10/05/01 10,918 6,804 4,114 23.2% 10/12/01 11,948 7,012 3,936 20.6% 10/16/01 12,901 6,893 6,008 30.5% Most bearish reading of the year: (1,028) - 1/02/01 Most bullish reading of the year: 8,460 - 3/13/01 DOW JONES INDUSTRIAL Commercial traders moved to their most bullish net stance of the year last week in the Dow. Meanwhile, small traders eased off from their most bearish reading of the year two weeks ago, but remained decidedly bearish on the prospects of the Dow. Commercials Long Short Net % of OI 10/05/01 22,755 10,124 12,631 38.3% 10/12/01 24,873 10,194 14,679 41.7% 10/16/01 25,402 10,267 15,135 42.5% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 15,135 - 10/16/01 Small Traders Long Short Net % of OI 10/05/01 4,731 11,868 (7,137) (43.0%) 10/12/01 3,517 12,294 (8,777) (55.5%) 10/16/01 4,514 12,104 (7,590) (45.7%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 1,909 - 1/16/01 -----------------------------------------------------------------
