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Market Sentiment, Tuesday, 08/10/2004

Short Covering
By James Brown

Depending on what direction you've been trading it's been pretty easy to get whipsawed in this market. Last week stocks were breaking down through support left and right. Given today's massive and broad-based bounce a good number of stocks have reversed their bearish breakdowns. Some of the indices are painting what could be three-day bullish reversal candlestick patterns.

Is today a one-day fluke or is it a repeat of the late July oversold bounce that will die out in a couple of more days? Market internals were certainly bullish with advancing stocks outnumbering decliners by more than 3-to-1 on the NYSE and 21 to 8 on the NASDAQ. Up volume was about six times down volume on the NYSE and about three times down volume on the NASDAQ. Those are some bullish readings although overall volume was somewhat light.

It makes one wonder if today's gain was mostly fueled by short covering. A lot of traders could have been opening new shorts on last week's breakdown and to have stocks back above their support levels today could be unnerving. Thursday and Friday will bring a number of new economic data but it's the upcoming Olympics and Republican convention that could be the market moving or stalling events. You may have already guessed that with volume this low a number of investors have just moved to the sidelines until September. That may be a good idea.


Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  9146
Current     :  9944

Moving Averages:
(Simple)

 10-dma: 10025
 50-dma: 10184
200-dma: 10227

	
S&P 500 ($SPX)

52-week High: 1163
52-week Low :  974
Current     : 1079

Moving Averages:
(Simple)

 10-dma: 1089
 50-dma: 1105
200-dma: 1108

		
Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1208
Current     : 1346

Moving Averages:
(Simple)

 10-dma: 1368
 50-dma: 1413
200-dma: 1445

		



CBOE Market Volatility Index (VIX) = 17.47 -1.42
CBOE Mkt Volatility old VIX  (VXO) = 16.90 -1.56
Nasdaq Volatility Index (VXN)      = 26.52 -0.93


Put/Call Ratio Call Volume Put Volume Total 1.03 606,837 622,547 Equity Only 0.89 420,364 375,145 OEX 0.69 42,620 29,576 QQQ 3.80 20,778 78,877
Bullish Percent Data Current Change Status NYSE 54.3 - 1 Bear Confirmed NASDAQ-100 27.0 - 1 Bear Confirmed Dow Indust. 53.3 + 0 Bear Confirmed S&P 500 48.4 - 1 Bear Confirmed S&P 100 49.0 - 1 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: 1.60 10-dma: 1.37 21-dma: 1.33 55-dma: 1.20 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 2131 2189 Decliners 677 855 New Highs 30 19 New Lows 49 119 Up Volume 1254M 1074M Down Vol. 216M 357M Total Vol. 1482M 1455M M = millions
Commitments Of Traders Report: 07/27/04 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 haven't made any big bets but the data we're looking at doesn't reflect the big sell-off in the last two days. Small traders remain bullish as of this report. Commercials Long Short Net % Of OI 07/13/04 407,166 416,869 ( 9,703) (1.2%) 07/22/04 404,828 419,017 (14,189) (1.7%) 07/27/04 397,354 422,914 (25,560) (3.1%) 08/03/04 401,619 419,429 (17,810) (2.2%) 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 07/13/04 133,935 95,787 38,148 16.6% 07/22/04 138,123 94,990 43,133 15.5% 07/27/04 135,136 90,433 44,703 19.8% 08/03/04 128,510 88,833 39,677 18.3% 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 Not much movement in the e-minis from commercial traders. Small traders have turned a bit more bullish, but again this is before the big sell-off. Commercials Long Short Net % Of OI 07/13/04 265,142 427,017 (161,875) (23.4%) 07/22/04 309,972 428,240 (118,268) (16.0%) 07/27/04 337,615 429,477 ( 91,862) (12.0%) 08/03/04 340,053 428,736 ( 88,683) (11.5%) 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 07/13/04 225,410 57,699 167,711 59.2% 07/22/04 212,078 62,416 149,662 54.5% 07/27/04 186,211 68,930 117,281 46.0% 08/03/04 195,105 68,717 126,388 47.9% 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 reversed their previous gain by paring their longs and adding to their shorts. Meanwhile small traders have turned bearish again. Commercials Long Short Net % of OI Commercials Long Short Net % of OI 07/13/04 44,211 37,007 7,204 8.9% 07/22/04 45,069 37,975 7,094 8.5% 07/27/04 43,042 35,935 7,107 9.0% 08/03/04 42,771 36,863 5,908 7.4% 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 07/13/04 7,847 15,243 (7,396) (32.0%) 07/22/04 9,398 11,776 (2,378) (11.2%) 07/27/04 14,543 14,518 25 0.0% 08/03/04 8,995 13,901 (4,906) (21.4%) 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 Commercials seem to be taking some money off the table as their bullish stances seems to waver a bit here. Small traders pared back their longs and their shorts but remained net bearish. Commercials Long Short Net % of OI 07/13/04 27,773 20,573 7,200 14.9% 07/22/04 27,957 20,389 7,568 15.7% 07/27/04 27,577 21,427 6,150 12.5% 08/03/04 30,118 25,029 5,089 9.2% 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 07/13/04 5,292 9,068 (3,776) (26.3%) 07/22/04 4,857 7,297 (2,440) (20.1%) 07/27/04 5,310 6,099 ( 789) ( 6.9%) 08/03/04 4,325 5,212 ( 887) ( 9.3%) 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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