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Market Sentiment, Tuesday, 07/15/2003

Bullish or bearish?
by Jonathan Levinson

Equities declined today as treasuries made huge moves lower and the US Dollar Index moved higher. We also witnessed a large spike in options volatility for the Nasdaq 100 as measured by the QQV, which added just under 10% to close at 30.45, while the VIX gained .43 to 21.84 and the VXN .06 to 33.95.

We generally expect to see an increase in options volatility on a down day, but the spike in the QQV was out of the ordinary. Meanwhile, the CBOE put to call ratio was printing extreme readings, but to the downside, with the equity put to call ratio below .40 for most of the session, and the total put to call ratio barely clearing .50.

The spike in the QQV is a panic-type indication, while the put to call data reflected just the opposite. How do we read it?

Options volatility increases as options premium increases. On its own, it indicates that one of the two parties to a trade wants the contract badly enough to pay extra for it. The put to call ratio at low levels indicates a predominance of call volume over put volume. It appears that the market was willing to pay more for QQQ calls today in particular. The VIX and VXN made gains, but nothing approaching that of the QQV.

To determine whether the action was bullish or bearish depends on which party was doing the buying. If it was institutions buying back QQQ calls of which they were short, the action would appear bullish to me, while if it was dip-buyers actively going long QQQ calls in anticipation of a blast higher, it looks more bearish.


Market Averages

DJIA ($INDU)

52-week High:  9353
52-week Low :  7197
Current     :  9128


Moving Averages:
(Simple)

 10-dma: 9131
 50-dma: 8928
200-dma: 8431



	
S&P 500 ($SPX)

52-week High: 1015
52-week Low :  768
Current     : 1000


	
Moving Averages:
(Simple)

 10-dma:  996
 50-dma:  970
200-dma:  899



		
Nasdaq-100 ($NDX)

52-week High: 1316
52-week Low :  795
Current     : 1294



Moving Averages:
(Simple)

 10-dma: 2380
 50-dma: 1200
200-dma: 1061


		


There isn't much more to say about the VIX and VXN tonight that
Jon didn't already mention above.  As expected on the down market
day, these two both edged higher but not by any significant amount.

CBOE Market Volatility Index (VIX) = 20.72 -0.81
Nasdaq-100 Volatility Index  (VXN) = 32.80 -0.86



Put/Call Ratio Call Volume Put Volume Total 0.54 738,400 395,388 Equity Only 0.40 602,842 241,528 OEX 0.66 39,943 26,619 QQQ 0.38 73,599 28,096
Bullish Percent Data Current Change Status NYSE 73.1 + 0 Bull Confirmed NASDAQ-100 81.0 + 1 Bull Confirmed Dow Indust. 83.3 - 3 Bull Confirmed S&P 500 80.0 + 1 Bull Confirmed S&P 100 83.0 + 1 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-Day Arms Index 1.10 10-Day Arms Index 1.06 21-Day Arms Index 1.18 55-Day Arms Index 1.14 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 1020 1354 Decliners 1856 1666 New Highs 185 300 New Lows 12 3 Up Volume 605M 772M Down Vol. 1212M 1113M Total Vol. 1831M 1905M M = millions
***No New COT Data due to the holiday. Check for updated COT data in the Market Sentiment on Tuesday.*** Commitments Of Traders Report: 07/08/03 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 There was little change last week in the large S&P contracts. It appears both big and small traders are waiting to see how the initial burst of Q2 earnings come in and how investors react to them. Commercials Long Short Net % Of OI 06/17/03 519,887 501,401 18,486 1.8% 06/24/03 405,382 447,526 (42,144) (4.9%) 07/01/03 415,976 453,005 (37,029) (4.3%) 07/08/03 415,053 453,720 (38,667) (4.5%) Most bearish reading of the year: (111,956) - 3/06/02 Most bullish reading of the year: 18,486 - 6/17/03 Small Traders Long Short Net % of OI 06/17/03 202,040 184,028 18,012 4.6% 06/24/03 159,405 85,182 74,223 30.3% 07/01/03 150,232 75,937 74,295 32.8% 07/08/03 152,239 74,749 77,490 34.2% 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 The same holds true for the commercials here in the e-minis, as they appear to be waiting before making any big commitments. However, we've seen a drastic turnaround in the small traders sentiment going from extremely bullish to know the most bearish in months. Commercials Long Short Net % Of OI 06/17/03 306,279 661,114 (354,835) (36.6%) 06/24/03 150,208 201,724 (51,516) (14.6%) 07/01/03 175,893 216,993 (41,100) (10.5%) 07/08/03 192,815 224,124 (31,309) ( 7.5%) Most bearish reading of the year: (354,835) - 06/17/03 Most bullish reading of the year: ( 51,516) - 06/24/03 Small Traders Long Short Net % of OI 06/17/03 466,837 70,609 396,228 73.7% 06/24/03 84,081 44,347 39,734 30.9% 07/01/03 57,639 67,449 9,810 7.8% 07/08/03 56,394 72,090 15,696 12.2% Most bearish reading of the year: 39,734 - 06/24/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 NASDAQ futures remain in a holding pattern. Commercials remain net short and small traders remain net long. Commercials Long Short Net % of OI 06/17/03 60,964 65,561 (4,597) (3.6%) 06/24/03 28,780 47,425 (18,645) (24.4%) 07/01/03 28,662 48,265 (19,603) (25.5%) 07/08/03 30,489 48,311 (17,822) (22.6%) Most bearish reading of the year: (18,645) - 6/24/03 Most bullish reading of the year: 9,068 - 06/11/02 Small Traders Long Short Net % of OI 06/17/03 29,400 23,232 6,168 11.7% 06/24/03 24,519 7,064 17,455 55.3% 07/01/03 26,777 8,498 18,279 51.8% 07/08/03 26,136 9,035 17,101 48.6% 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 Ditto here too. There's almost no change in the commercials' net long position in the Industrial futures and there is a small bump in the small traders net short position. Commercials Long Short Net % of OI 06/17/03 20,625 18,593 2,032 5.1% 06/24/03 19,373 11,565 7,808 25.2% 07/01/03 20,504 11,871 8,633 26.7% 07/08/03 20,752 11,860 8,892 27.3% 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 06/17/03 9,092 9,398 ( 306) ( 1.6%) 06/24/03 5,950 7,442 (1,492) (11.1%) 07/01/03 5,799 6,822 (1,023) ( 8.1%) 07/08/03 5,005 8,093 (3,088) (23.6%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 1,909 - 1/16/01


 

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