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Market Sentiment, Sunday, 02/15/2004

Look at the time!
By J. Brown

Wow! Would you believe it? February is half over and we're already six weeks into the new year. And what an eventful year it has been. On Wednesday the Dow Jones Industrials, the S&P 500 and the Wilshire 5000 index all hit new highs, surpassing January's peak. Not bad for a February, which is typically the third worst month of the year for stocks. We've just survived a very eventful Q4 earnings season, the two-day FOMC meeting, Greenspan's appearances before congress and a wardrobe malfunction during the Super Bowl.

The only thing more surprising was the Comcast bid to buy Disney. Well that and the strength in this market. It seems like the market has become immune to headlines of "white powder" and other potential threats showing up in Washington post offices and congressional buildings. Not to mention air travel cancellations based on terrorist data. It's amazing how fast we adjust. Speaking of adjusting it looks like consumers have altered their confidence levels from irrationally exuberant in January back down to just really confident with the disappointing February Michigan sentiment numbers. Now if we could only get this growing economy to produce some jobs the forecast would look pretty bright.

In the mean time Wall Street will have to settle with a strong corporate profit outlook, low interest rates, a federal reserve promising to be "patient" and a declining dollar that is benefiting multinational corporations based in the U.S. Sounds pretty good doesn't it? The only bad news seems to be a market rally that is finally looking a little tired (again), at least in a few indices. The NASDAQ and the Russell 2000 both produced lower highs on the Thursday-Friday decline this week. Joining them were nearly all the tech indices (Disk drives, hardware, software, internets, semiconductors) also producing lower highs. Throwing a shadow across the technical picture was the Dow Transports index, which is failing under its 50-dma after last week's big bounce. One of the recent winners, the drug sector, experienced some decent profit taking too.

However, this last week was not without its bright spots. Oil service stocks continued to soar and natural gas issued rode their coattails. Hitting new highs were the DFI defense index and the IUX insurance index. Also noteworthy is the RLX retail index, which has maintained its recent gains and is approaching four-year highs.

Next will bring a basketful of economic reports but the headline numbers will be the PPI on Thursday and the CPI on Friday. Plus, we still have earnings from retail titan Wal-Mart (WMT) on February 19th and semiconductor equipment giant Applied Materials (AMAT) on February 18th. Both companies have significant influence on their sectors and will affect investor confidence. Last week the second largest chip equipment maker Tokyo Electron quadrupled its estimates. I don't believe AMAT, the largest equipment maker, can produce similar guidance but they should have positive comments given the strength in the chip business.


Market Averages

DJIA ($INDU)

52-week High: 10746
52-week Low :  7416
Current     : 10627


Moving Averages:
(Simple)

 10-dma: 10581
 50-dma: 10392
200-dma:  9577



	
S&P 500 ($SPX)

52-week High: 1158
52-week Low :  788
Current     : 1145


	
Moving Averages:
(Simple)

 10-dma: 1141
 50-dma: 1113
200-dma: 1030


		
Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low :  795
Current     : 1484



Moving Averages:
(Simple)

 10-dma: 1489
 50-dma: 1476
200-dma: 1341


		


Friday produced a decent bounce in the VXO but these indices
remain low and are still no help in suggesting a change in
direction.

CBOE Market Volatility Index (VIX) = 15.58 +0.27
CBOE Mkt Volatility old VIX  (VXO) = 15.63 +0.73
Nasdaq Volatility Index (VXN)      = 24.14 +0.61



Put/Call Ratio Call Volume Put Volume Total 0.76 766,143 582,099 Equity Only 1.71 632,241 370,129 OEX 0.85 37,220 43,539 QQQ 2.78 27,000 75,155
Bullish Percent Data Current Change Status NYSE 77.2 + 0 Bull Confirmed NASDAQ-100 69.0 + 0 Bear Alert Dow Indust. 86.7 + 0 Bull Confirmed S&P 500 88.2 + 0 Bull Confirmed S&P 100 89.0 + 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: 1.04 10-dma: 1.00 21-dma: 0.96 55-dma: 0.98 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 1029 1013 Decliners 1813 2048 New Highs 311 158 New Lows 9 2 Up Volume 517M 481M Down Vol. 1077M 1260M Total Vol. 1619M 1753M M = millions
Commitments Of Traders Report: 02/10/04 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 No change for the Commercial traders. Small Traders have grown slightly more bullish. Commercials Long Short Net % Of OI 01/23/04 422,135 407,626 14,509 1.7% 01/27/04 417,089 410,930 6,159 0.7% 02/03/04 411,920 414,596 (2,676) (0.3%) 02/10/04 412,217 414,044 (1,827) (0.2%) 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 01/23/04 141,107 100,090 41,017 17.0% 01/27/04 143,089 87,828 55,261 23.9% 02/03/04 141,465 81,926 59,539 26.7% 02/10/04 143,496 80,362 63,134 28.2% 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 Commercials are starting to put some money to work and we're seeing another jump in contracts for both longs and shorts. Small traders have pared back their longs a bit and put some of that money on the short side. Commercials Long Short Net % Of OI 01/23/04 233,867 307,122 (73,255) (13.5%) 01/27/04 291,166 334,618 (43,452) ( 6.9%) 02/03/04 280,519 346,042 (65,523) (10.5%) 02/10/04 297,601 356,630 (59,029) ( 9.0%) Most bearish reading of the year: (354,835) - 06/17/03 Most bullish reading of the year: 133,299 - 09/02/03 Small Traders Long Short Net % of OI 01/23/04 187,270 57,196 130,074 53.2% 01/27/04 154,485 60,556 93,929 43.7% 02/03/04 133,293 55,476 77,817 41.2% 02/10/04 110,480 58,428 52,052 30.8% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Not much change from the Commercial traders but they are a tiny bit more bullish here. Small Traders have significantly bumped up their long positions. Commercials Long Short Net % of OI 01/23/04 42,823 39,442 3,381 4.1% 01/27/04 43,704 40,951 2,753 3.3% 02/03/04 43,600 41,441 2,159 2.5% 02/10/04 44,406 40,439 3,967 4.7% Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 9,068 - 06/11/02 Small Traders Long Short Net % of OI 01/23/04 9,180 11,371 (2,191) (10.7%) 01/27/04 10,137 10,715 ( 578) ( 2.8%) 02/03/04 8,907 13,729 (4,822) (21.3%) 02/10/04 9,906 13,018 (3,112) (13.6%) Most bearish reading of the year: (10,769) - 06/11/02 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Not much change this week for Commercials. Small traders are slightly more bearish on the Dow. Commercials Long Short Net % of OI 01/23/04 16,403 9,252 7,151 27.9% 01/27/04 16,536 8,404 8,162 32.7% 02/03/04 17,765 9,619 8,146 29.7% 02/10/04 21,764 11,974 9,790 29.0% 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 01/23/04 6,068 10,183 (4,115) (25.3%) 01/27/04 7,240 12,372 (5,132) (26.2%) 02/03/04 6,352 13,113 (6,761) (34.7%) 02/10/04 6,267 14,220 (7,953) (38.8%) Most bearish reading of the year: (10,136) - 12/16/03 Most bullish reading of the year: 8,523 - 8/26/03


 

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