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Market Sentiment, Thursday, 07/24/2003

Setting your sights
By Jonathan Levinson

The VIX broke below 20 today and stayed there for several hours today, as the price of gold broke 360. In the meantime, the put to call ratio was looking moderate, the oscillators were edging toward possibly higher levels, and the US Dollar Index was rallying off its lows. There was a bullish surprise in the jobs data as well, with initial claims falling below 400,000 for the first time in several months. This last is news to cheer.

The markets put in a pattern of higher highs and higher lows this week, with a "senseless" rally on the news of Hussein's sons being killed. Ben Bernanke held out the promise of a fresh assault on the value of the dollar, which would be as bullish for equities as it was the last time he did it during the fall of 2002.

It's difficult to know which of our many indicators to follow in divining market direction. Other than by trading mechanically, which many do, one must rely on a healthy dose of intuition in the attempt to "hear" the combined message of the indicators. To practice this art requires not tighter focus, but distance from the screen. Today's selling was "impulsive", insofar as it exceeded the speed and extent of the buying surges during recent sessions. Once again, on a longer term basis, it feels as if the top of the rally is in.


Market Averages

DJIA ($INDU)

52-week High:  9353
52-week Low :  7197
Current     :  9112


Moving Averages:
(Simple)

  10-dma: 9132
 50-dma: 9002
200-dma: 8482



	
S&P 500 ($SPX)

52-week High: 1015
52-week Low :  768
Current     :  981


	
Moving Averages:
(Simple)

 10-dma:  990
 50-dma:  977
200-dma:  905



		
Nasdaq-100 ($NDX)

52-week High: 1316
52-week Low :  795
Current     : 1253



Moving Averages:
(Simple)

 10-dma: 1269
 50-dma: 1216
200-dma: 1076


		


There was much commotion made today over the VIX finally piercing
its historical sell signal of 20 today.  Typically, when the VIX 
hits 20 it's a sign that the markets have topped and further weakness
is in store.  The VIX has been vacillating above 20 for so long that
many felt we may never actually see the 20 level hit.  Now just 
because the VIX hit 20 today doesn't mean the markets are going to 
drop tomorrow.  Using the volatility index is not an exact science.
We could easily see it trade down to 19 or lower, which usually 
means investor bullishness is reaching extremes.  However, we
can't ignore this signal and bullish traders are advised to monitor
their stop losses carefully.

CBOE Market Volatility Index (VIX) = 20.44 +0.00
Nasdaq-100 Volatility Index  (VXN) = 31.45 +0.67



Put/Call Ratio Call Volume Put Volume Total 0.75 653,637 488,014 Equity Only 0.64 515,611 332,345 OEX 0.59 33,358 19,567 QQQ 2.03 30,648 62,359
Bullish Percent Data Current Change Status NYSE 69.5 - 2 Bull Confirmed NASDAQ-100 76.0 - 2 Bull Confirmed Dow Indust. 86.6 + 3 Bull Confirmed S&P 500 76.2 + 0 Bull Correction S&P 100 84.0 + 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 0.93 10-Day Arms Index 0.96 21-Day Arms Index 1.11 55-Day Arms Index 1.13 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 1384 1443 Decliners 1463 1594 New Highs 105 185 New Lows 21 11 Up Volume 772M 748M Down Vol. 1066M 1095M Total Vol. 1846M 1858M M = millions
Commitments Of Traders Report: 07/15/03 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 Stuck in limbo. The large S&P contracts saw little movement by both the small traders and the large commercial traders. Investors could be waiting to get some sort of reading on trader sentiment after the first week of earnings has been completed. Commercials Long Short Net % Of OI 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%) 07/15/03 414,020 453,033 (39,013) (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 06/24/03 159,405 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% 07/15/03 148,716 70,279 78,437 35.8% 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 S&P e-mini contracts saw more shuffling than the larger contracts (above) but overall there is little to discern. Except for the slight less bearish bias in the Commercials who bumped up their long positions while scaling back a few of their shorts, which effectively reduced their net short to a meager 4500 contracts. Meanwhile the small traders lightened up on both long and short contracts but remain rather bearish. Commercials Long Short Net % Of OI 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%) 07/15/03 214,274 218,765 ( 4,491) ( 1.0%) Most bearish reading of the year: (354,835) - 06/17/03 Most bullish reading of the year: ( 4,491) - 07/15/03 Small Traders Long Short Net % of OI 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%) 07/15/03 45,372 54,654 (9,282) (9.3%) Most bearish reading of the year: (15,696) - 07/08/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Much like the larger S&P futures there was little change in the NASDAQ 100 futures. Yet we must note one exception. The shuffling in the commercial long/short positions produced the most bearish reading in months. Close a few long contracts here, add a few short contracts here and we have a new relative high in net short positions. Commercials Long Short Net % of OI 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%) 07/15/03 28,467 49,154 (20,687) (26.7%) Most bearish reading of the year: (20,687) - 07/15/03 Most bullish reading of the year: 9,068 - 06/11/02 Small Traders Long Short Net % of OI 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% 07/15/03 26,489 8,004 18,485 53.6% 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 Somewhat interesting behavior by the commercials last week. They scaled down their short positions, which significantly bumped up their net long holdings over all. This is effectively telling us that institutions still think the Industrials well be stronger in the coming weeks. Commercials Long Short Net % of OI 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% 07/15/03 21,607 7,855 13,752 46.7% 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 06/24/03 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%) 07/15/03 5,475 9,717 (4,242) (27.9%) 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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