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Market Sentiment, Sunday, 06/13/2004

Unmotivated
By James Brown

The markets have been very flat the last three days because there is little reason for investors to move. The major indices are at or near significant resistance but there was no impetus to buy stocks with the long weekend ahead of them. What surprised us was there was not much selling pressure ahead of the weekend given the opportunity for what many are calling "event risk". Any time there is a long weekend and one with national events like the funeral tomorrow investors generally turn cautious and minimize or hedge positions.

Investors are focused on more than just the weekend. Next week we have a number of fed governors offering comments so they can prep the markets ahead of the two-day FOMC meeting at the end of June. We might get the PPI report out next week too if the government can finish their calculations. The PPI will cast more light on the state of inflation and this could determine whether or not we get a 25 basis point hike or more. Most analysts are only expecting a 25-point hike in June so this shouldn't change if the PPI comes in near the estimate for a +0.05% jump in prices. Unfortunately, traders are unmotivated to make any moves until after the FOMC meeting and the interest rate decision is know.

What should be a concern for traders are the volatility indices. The VXO or the old VIX is back under the 14 level again. Jim discussed the VXO and how it generally signals market tops in his wrap on Tuesday. Currently with the VXO this low it's signaling that investors have almost no fear. When everyone's leaning the same direction it usually time for a change. Interpreting the volatility indices is more art than science and the signals can be a few days off but we need to be careful when consider new bullish positions. The VIX and VXO can always trade lower, which is something we've learned over the past year or two.


Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  8871
Current     : 10242

Moving Averages:
(Simple)

10-dma: 10290
 50-dma: 10266
200-dma: 10101
	
S&P 500 ($SPX)

52-week High: 1163
52-week Low :  962
Current     : 1136

Moving Averages:
(Simple)

 10-dma: 1127
 50-dma: 1120
200-dma: 1090

		
Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1180
Current     : 1481

Moving Averages:
(Simple)

 10-dma: 1470
 50-dma: 1448
200-dma: 1433

		



CBOE Market Volatility Index (VIX) = 15.04 -0.35
CBOE Mkt Volatility old VIX  (VXO) = 13.91 -0.85
Nasdaq Volatility Index (VXN)      = 21.23 -1.12 


Put/Call Ratio Call Volume Put Volume Total 1.15 486,746 559,901 Equity Only 1.01 364,599 367,379 OEX 1.16 27,569 31,867 QQQ 3.97 22,707 90,205
Bullish Percent Data Current Change Status NYSE 65.8 - 1 Bear Confirmed NASDAQ-100 40.0 + 0 BULL ALERT Dow Indust. 70.0 + 0 Bear Confirmed S&P 500 63.6 + 0 Bear Confirmed S&P 100 63.0 + 0 Bear 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: 0.77 10-dma: 0.94 21-dma: 1.01 55-dma: 1.00 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 1607 1533 Decliners 1201 1472 New Highs 45 33 New Lows 24 31 Up Volume 844M 724M Down Vol. 568M 578M Total Vol. 1458M 1327M M = millions
Commitments Of Traders Report: 06/01/04 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 Action in the large S&P 500 futures contracts has been slow. Commercial traders remain net short but the bearish interest has been declining for two weeks now. Small traders' positions are virtually unchanged. Commercials Long Short Net % Of OI 05/11/04 401,365 421,672 (20,307) (2.5%) 05/18/04 394,352 423,258 (28,906) (3.5%) 05/25/04 400,713 420,764 (20,051) (2.4%) 06/01/04 406,665 421,681 (15,016) (1.8%) 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 05/11/04 135,534 76,987 58,547 27.5% 05/18/04 139,647 74,597 65,050 30.4% 05/25/04 136,086 79,060 57,026 26.5% 06/01/04 137,100 79,583 57,517 26.5% 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 Wow! Commercial traders are completely undecided with a dead heat between longs and shorts. Meanwhile small traders have turned bullish. Commercials Long Short Net % Of OI 05/11/04 378,696 362,887 15,809 2.1% 05/18/04 390,484 357,157 33,327 4.5% 05/25/04 353,722 336,406 17,316 2.5% 06/01/04 325,865 325,274 591 0.0% 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 05/11/04 101,199 94,408 6,791 3.5% 05/18/04 62,216 87,269 25,053 16.8% 05/25/04 91,515 100,759 ( 9,244) ( 4.8%) 06/01/04 111,484 90,625 20,859 10.3% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Commercial traders have hit new bullish extremes we've not seen in many months. Right on track small traders have hit bearish extremes. Commercials Long Short Net % of OI 05/04/04 56,931 35,209 21,722 23.6% 05/18/04 58,376 37,528 20,848 21.8% 05/25/04 59,891 37,630 22,261 22.8% 06/01/04 59,944 34,784 25,160 26.6% Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 25,160 - 06/01/04 Small Traders Long Short Net % of OI 05/11/04 9,716 21,072 (11,356) (36.9%) 05/18/04 9,843 18,935 ( 9,092) (31.6%) 05/25/04 10,184 20,653 (10,469) (33.9%) 06/01/04 9,755 30,025 (20,270) (51.0%) Most bearish reading of the year: (20,270) - 06/01/04 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Not much action going on here with the commercial traders. They remain slightly bearish on the Dow. Small traders are growing more bullish. Commercials Long Short Net % of OI 05/11/04 22,614 21,507 1,107 2.5% 05/18/04 22,257 22,444 ( 187) (0.4%) 05/25/04 23,578 24,632 (1,045) (2.2%) 06/01/04 23,397 24,393 ( 996) (2.0%) 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 05/11/04 7,009 7,640 ( 631) ( 4.3%) 05/18/04 9,098 6,591 2,507 16.0% 05/25/04 9,623 6,614 3,009 18.5% 06/01/04 9,000 6,021 2,979 19.8% 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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