Dr Faessel - Yet, So Far It's a "Sanguine" Pullback
June 06, 2011 10:03 AM
Bullish Market Sentiment Evaporating
Major indexes break well below 50-day moving averages
The 5-week old “down” channel remains intact
Yet, so far it's a "sanguine" pullback
Over the last five weeks the major indexes have worked their way lower; yet it's been a fairly low volume and orderly erosion. The S&P 
Put / call volume ratio's (worry) have moved to highs not seen since May 2010. Bullish sentiment has evaporated and Bearish sentiment is a raging, both pluses for the market. "Price" in the Bollinger bands is at the low end of the spectrum and quite oversold as are the stochastics that suggest a possible market rise is eminent. Yet the McClellan Oscillator (my favorite overbought / oversold indicator) remains in neutral that shows to me buyers are waiting below the bid and not bailing on the “Market”.
Net, net; worry over the state of the world (you fill in) has definitely affected bullish sentiment, but the market has hung in there without coming totally unglued. In fact, considering the abominable news flow over the last month and a half the market reaction has been sanguine. Apparently all the bad news has not worked its way into the "numbers" yet. Remarkable!
Short term price resistance in the in the S&P 500 (SPX) is at 1304 - then at 1308 / 1309. And then just below 1318. The 50-day moving average resistance in the S&P 500 (SPX) is at 1333.
Short-term support in the S&P 500 (SPX) is at 1295 / 1300. Seven (7) -weeks ago Monday's low (S&P downgrade of our debt) and price support is at (SPX) 1249. The 200-day moving average support is 1248. The (SPX[FREE Stock Trend Analysis]) closed at 1300.16.
Tracking the Bond Markets $ 91 Trillion
Alert - The BARRON's Confidence Index ** last week fell to a low not seen in over 9-months at 77.5. It was down a few ticks from last week's posting of 79.8. Just over three-months ago it posted new cycle highs of 83.7, but it never did reach the 2008 highs of 85 & 86.
Cycle highs or lows indicated in RED
Friday's key indicators and metrics:
· Friday's McClellan Oscillator is Neutral @ minus 90
· Copper – 4.13
· Friday's Gold (COMEX) $1541.7
· Friday's Silver (COMEX) 37.326
· Crude oil (NYMEX) $100.22
· The Treasury 10-year yield 2.9970
· 3-month $ LIBOR at 0.252 (5-year / forever lows)
· CBOE Put / Call Volume Ratio – 1.24/ Thursdays 1.07 / Wednesday 1.15
· Euro – 1.462
· VIX – 17.95
· US Dollar Index – 73.81
· Canadian Dollar – 1.0230
· Aussie Dollar – 1.0721
· Swiss Franc – 1.1958
* Key WEEKLY BULLISH SENTIMENT (i.e. CONTRARY INDICATOR) data points are showing that BULLISHNESS is evaporating fast.
Last week Consensus overview of Bullish Investor Sentiment fell again more dramatically % wise that in the recent weeks and is now approaching “ ugly” well off the high bullishness established in January and February.
(High BULLISH readings in the Investor Sentiment Readings usually are signs of Market tops; low ones, market bottoms.)
· The American Association of Individual Investors [AAII] Investor Sentiment Survey of BULLISHNESS popped a bit to 30.2% from the 25.6% of last week. 6-weeks ago it was 37.9%. In January it ticked new cycle highs of 63.3%. [The lows registered on March 9th 2009 were an historic low posting of only 18.9% BULLISH.]
· The AAII Investor Survey of BEARISH sentiment fell to 33.4% from the 41.4% of last week. The February lows were 25.6%. January's BEARISH sentiment cycle lows were at 16.4% and that was lows not seen since 2005. The highest Bearishness occurred when it ticked the summer “market retreat” high at 57.1%. Item of note: In August 1987 it ticked the lowest low ever recorded at 6% BEARISH – Remember what happened on October 19, 1987...
· Consensus Index BULLISH investor sentiment was 56% down another piece from the 60% posting of last week. 5-weeks ago it was 73%. The recovery cycle high at 76% was established 11-weeks ago. Multi-year highs in Bullish sentiment of 76% were first reached in the first week of May 2007 just prior to the massive down-leg.
· The Market Vane (Market Letter Survey) readings again ticked up to 59% from last week's 55%. The survey posted new cycle highs in bullishness at 68% three months ago. Market Letter writers have reversed off the levels of the Bullishness seen in late 2007 when the Market Vane routinely registered routinely above 70%.
· The Citygroup “Panic / Euphoria” Model moved higher a few ticks to a plus 0.07 from last week's plus 0.03. Six-weeks ago it registered a cycle high of a plus 0.38 that was still in the neutral zone but, close to the euphoria zone. The model moved from panic into neutral in October 2010. During the dot-com bubble highs of December 1999 the model posted ALL-TIME highs of La-La-Land euphoria at 1.70.
** The Confidence Index is the premier measure of how the bond markets trillions (total global is around $91 trillion and USA is 39% of that) are allocated: (The bond market is twice the size of the stock market.) The ability of this key indicator of market health to post near new highs bodes well for the economic recovery and for stocks to continue forward. One year ago the index was 79.0.
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