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Market Sentiment, Tuesday, 01/04/2005

Q4 Hangover
By James Brown

I've got one word for the first two trading days of 2005 - yuck! Market pundits blame it on profit taking after the very strong fourth quarter rally. Correct or not the market technicals have been very bearish both Monday and Tuesday. Today declining stocks outnumbered advancers about 11-to-3 on the NYSE and more than 3-to-1 on the NASDAQ. New highs have evaporated and down volume outweighed up volume by 9-to-1 on the NYSE and more than 4-to-1 on the NASDAQ. Yucky seems like an appropriate description.

The talking heads on TV pointed out that last quarter's winners seem to be this week's losers as investors do some profit taking. Yet one guest on CNBC today was more encouraging. Biderman from TrimTabs, who watches mutual fund money inflows and outflows, said almost all the new money coming into the market this week (about $1 billion a day) has been going into global equity funds. He suggested that investors were putting money to work overseas to avoid the continuing decline in the U.S. dollar. He went on to say that if inflows into foreign funds have reached these heights that it could be a top. Thus the U.S. dollar could turnaround soon and U.S. stocks are likely to do well in the second half of January. He went on to remind viewers that there is a lot of money on the sidelines and January, a seasonally bullish time of year for stocks, could see some $60 billion in inflows for the month.

Let's hope he's right. Normally the first two trading days of January are bullish as part of the seven-day post-Christmas rally. Plus, the first five days of January tend to be bullish due to the new inflow of money into retirement accounts but if all this money is going into global funds then the early January barometer (the first five days) could turn bearish. As I mentioned last week some traders look at the first five days of January as an early barometer for the month. Let's hope stocks rebound soon.


Market Averages

DJIA ($INDU)
52-week High: 10868
52-week Low :  9708
Current     : 10630

Moving Averages:
(Simple)

 10-dma: 10780
 50-dma: 10489 
200-dma: 10264 

	
S&P 500 ($SPX)

52-week High: 1216
52-week Low : 1060
Current     : 1188

Moving Averages:
(Simple)

 10-dma: 1207
 50-dma: 1178
200-dma: 1129

		
Nasdaq-100 ($NDX)

52-week High: 1635
52-week Low : 1301
Current     : 1571

Moving Averages:
(Simple)

 10-dma: 1611
 50-dma: 1568
200-dma: 1461

		



CBOE Market Volatility Index (VIX) = 13.98 -0.10 
CBOE Mkt Volatility old VIX  (VXO) = 14.13 -0.07
Nasdaq Volatility Index (VXN)      = 20.06 +0.56 


Put/Call Ratio Call Volume Put Volume Total 0.78 1,071,868 831,280 Equity Only 0.60 823,299 494,997 OEX 0.99 33,587 33,327 QQQQ 2.33 53,555 124,869
Bullish Percent Data Current Change Status NYSE 76.2 - 1 Bear Correction NASDAQ-100 80.0 + 0 Bull Confirmed Dow Indust. 73.3 + 0 Bull Confirmed S&P 500 77.2 - 1 Bull Confirmed S&P 100 78.0 + 0 Bull Confirmed 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-dma: 1.44 10-dma: 1.04 21-dma: 1.07 55-dma: 1.01 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 they do, they can signal significant market turning points.
Market Internals -NYSE- -NASDAQ- Advancers 636 741 Decliners 2221 2340 New Highs 53 57 New Lows 15 12 Up Volume 228M 530M Down Vol. 1853M 2175M Total Vol. 2146M 2718M M = millions
Commitments Of Traders Report: 12/21/04 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. COT data can be found at www.cftc.gov. 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 traders are growing more bearish while small traders are naturally moving the other direction and growing more bullish. Commercials Long Short Net % Of OI 11/30/04 462,394 491,813 (29,419) (3.0%) 12/07/04 450,072 498,057 (47,985) (5.0%) 12/14/04 502,471 540,494 (38,023) (3.6%) 12/21/04 455,238 502,538 (47,300) (4.9%) Most bearish reading of the year: (111,956) - 3/06/02 Most bullish reading of the year: 23,977 - 12/09/03 Small Traders Long Short Net % of OI 11/30/04 176,031 148,876 27,155 8.3% 12/07/04 187,707 135,776 51,931 16.0% 12/14/04 201,428 164,111 37,371 10.2% 12/21/04 157,015 106,205 50,810 19.2% Most bearish reading of the year: (1,657)- 5/27/03 Most bullish reading of the year: 114,510 - 3/26/02 E-MINI S&P 500 There has been a dramatic reduction in open positions for both longs and shorts for both the commercial traders and small traders. The net result has produced an increase in bearishness for professionals and an increase in bullishness for small traders. Commercials Long Short Net % Of OI 11/30/04 439,074 855,440 (416,366) (32.2%) 12/07/04 470,553 805,234 (334,681) (26.2%) 12/14/04 556,980 899,616 (342,636) (23.5%) 12/21/04 279,694 554,818 (275,124) (32.9%) Most bearish reading of the year: (436,367) - 11/23/04 Most bullish reading of the year: 133,299 - 09/02/03 Small Traders Long Short Net % of OI 11/30/04 386,665 67,926 318,739 70.1% 12/07/04 311,838 66,496 245,342 64.8% 12/14/04 398,915 137,598 261,317 48.7% 12/21/04 227,047 66,140 160,907 54.8% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Hmm... we are seeing a dramatic reversal for both commercial and small traders. Commercials have significantly cut their long positions reversing their bullishness into bearishness for the NDX. Small traders have drastically reduced their short positions to flip-flop them from net bearish to net bullish. Commercials Long Short Net % of OI 11/30/04 56,629 30,571 26,058 29.8% 12/07/04 57,621 34,313 23,308 25.4% 12/14/04 73,554 50,286 23,268 18.7% 12/21/04 30,614 45,158 (14,544) (19.1%) Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 26,058 - 11/30/04 Small Traders Long Short Net % of OI 11/23/04 11,153 39,712 (28,559) (56.1%) 11/30/04 9,902 44,779 (34,877) (63.7%) 12/07/04 15,489 49,064 (33,575) (52.0%) 12/14/04 26,781 58,159 (31,378) (36.9%) 12/21/04 20,840 9,109 11,731 39.1% Most bearish reading of the year: (34,877) - 11/30/04 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Commercial traders have suddenly become a lot more bearish on the Dow Industrials. Meanwhile small traders have significantly cut their positions on both sides of the trade. Commercials Long Short Net % of OI 11/30/04 22,622 25,411 (2,789) (5.8%) 12/07/04 25,523 27,351 (1,828) (3.4%) 12/14/04 36,960 38,566 (1,606) (2.1%) 12/21/04 24,850 31,920 (7,070) (12.4%) 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 11/30/04 5,739 8,536 (2,797) (19.6%) 12/07/04 5,274 9,507 (4,233) (28.6%) 12/14/04 13,445 19,089 (5,644) (17.3%) 12/21/04 5,637 6,961 (1,324) (10.5%) Most bearish reading of the year: (12,106) - 3/09/04 Most bullish reading of the year: 8,523 - 8/26/03


 

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