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Market Sentiment, Tuesday, 10/05/2004

Weak Economics and Rising Oil
By James Brown

What's on investors' minds these days? Record high oil prices is a hot topic. Light sweet crude close at $51.09 - an all-time record. A few weeks ago people were worried about $50 a barrel. Now the talk is $60 a barrel. This isn't good news for our economic recovery and it's not good news for consumers, businesses and future earnings numbers.

Less than inspiring economic data this morning didn't help matters. The ISM services index slipped to 56.7 percent in September, down from economists' expectations and the August reading at 59.0. Of course it's all about interpretation. Any reading over 50 is technically bullish because it represents economic growth and expansion.

The planned corporate job cuts report from Challenger, Gray and Christmas did not do much to inspire investors either. The latest data out this morning shows that American businesses plan to cut over 107,000 jobs over the next few months compared to just 74,000 in August. Some see the Challenger report as a leading indicator for this Friday's non-farm payrolls (jobs) report.

Another round of earnings warnings may be taking the wind out of the bulls' sails as well. On Monday it was homebuilder Pulte (PHM) who issued a warning and sent the entire sector lower. Today it was yet another semiconductor stock, this time AMD, who warned for the third quarter. The Q3 earnings season begins on Thursday with Alcoa and Friday with General Electric.

If you follow the ARMS index or short-term trading index you may notice that the 5-day moving average is sporting a very bearish reading at 0.68. Normally readings under 0.85 are consider bearish.

Look for oil to hog the spotlight again tomorrow. Wall Street will be waiting for the latest crude oil inventories numbers. Plus, there's always a chance that Fed Governors Poole or Hoenig may say something interesting as both speak at separate events tomorrow. Last but not least if there is any lack of news tomorrow the media is likely to fill it with recaps and analysis of the vice-presidential debate tonight.


Market Averages

DJIA ($INDU)
52-week High: 10753
52-week Low :  9230
Current     : 10177

Moving Averages:
(Simple)

 10-dma: 10106
 50-dma: 10121 
200-dma: 10298

	
S&P 500 ($SPX)

52-week High: 1163
52-week Low :  990
Current     : 1134

Moving Averages:
(Simple)

 10-dma: 1117
 50-dma: 1104
200-dma: 1119

		
Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1301
Current     : 1461

Moving Averages:
(Simple)

 10-dma: 1418
 50-dma: 1385
200-dma: 1441

		



CBOE Market Volatility Index (VIX) = 13.95 +0.54
CBOE Mkt Volatility old VIX  (VXO) = 13.27 +0.16
Nasdaq Volatility Index (VXN)      = 20.02 +0.41


Put/Call Ratio Call Volume Put Volume Total 0.83 849,417 709,061 Equity Only 0.67 740,807 497,794 OEX 1.48 19,754 29,358 QQQ 4.27 9,069 38,720
Bullish Percent Data Current Change Status NYSE 66.2 + 1 Bear Correction NASDAQ-100 47.0 + 3 Bull Alert Dow Indust. 60.0 + 3.6 Bear Correction S&P 500 64.4 + 1.8 Bear Correction S&P 100 63.0 + 1 Bear Correction 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: 0.68 10-dma: 1.07 21-dma: 1.97 55-dma: 1.12 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 1344 1359 Decliners 1467 1663 New Highs 185 70 New Lows 12 26 Up Volume 682M 967M Down Vol. 1051M 685M Total Vol. 1751M 1693M M = millions
Commitments Of Traders Report: 09/28/04 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 The most recent data doesn't show a lot of movement. Commercial traders upped their short positions a bit so they remain net bearish. Small traders didn't do much maneuvering and remain net bullish. Commercials Long Short Net % Of OI 09/07/04 415,952 426,342 (10,390) (1.2%) 09/14/04 442,049 469,982 (27,933) (3.0%) 09/21/04 404,746 425,560 (20,814) (2.5%) 09/28/04 404,773 434,441 (29,668) (3.5%) 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 09/07/04 157,732 130,817 26,915 9.3% 09/14/04 167,310 126,513 40,797 13.9% 09/21/04 134,943 108,036 26,907 11.1% 09/28/04 135,317 107,173 28,144 11.6% 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 e-minis always see a lot of action and this time we see the commercial traders upping both their longs and shorts in almost equal percentage moves so "smart" money remains bearish. Small traders also upped their longs and shorts and remain strongly net bullish. Commercials Long Short Net % Of OI 09/07/04 371,111 600,593 (229,482) (23.6%) 09/14/04 377,643 586,139 (208,496) (21.6%) 09/21/04 213,014 397,844 (184,830) (30.2%) 09/28/04 226,020 420,714 (194,694) (30.1%) 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 09/07/04 286,194 80,075 206,119 56.2% 09/14/04 289,155 81,314 207,841 56.1% 09/21/04 256,315 60,275 196,040 61.9% 09/28/04 262,501 68,255 194,246 58.7% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 The NDX futures aren't seeing much action from the commercials. They did up their short positions a bit after the previous periods significant drop. Yet professional traders remain net bullish on the NDX. In contrast the small trader remains heavily net bearish but not to the extreme they were a week ago. Commercials Long Short Net % of OI 09/07/04 51,814 44,179 7,635 7.9% 09/14/04 64,282 59,808 4,474 3.6% 09/21/04 54,530 30,827 23,703 27.7% 09/28/04 55,045 32,319 22,726 26.0% 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 09/07/04 16,817 12,561 4,256 14.5% 09/14/04 36,372 28,584 7,788 12.0% 09/21/04 7,417 25,821 (18,404) (55.3%) 09/28/04 10,078 22,917 (12,839) (38.9%) 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 Interesting... commercial traders didn't make many adjustments but small traders did. We're seeing small traders hedge their bets as their longs and shorts grow closer together. This has significantly reduced their bearish outlook on the Dow. Commercials Long Short Net % of OI 09/07/04 29,128 24,011 5,117 9.6% 09/14/04 41,951 34,486 7,465 9.7% 09/21/04 30,816 27,200 3,616 6.2% 09/28/04 29,714 26,877 2,837 5.0 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 09/07/04 5,041 8,656 (3,615) (26.4%) 09/14/04 8,121 14,425 (6,304) (27.9%) 09/21/04 4,467 6,748 (2,281) (20.3%) 09/28/04 5,143 5,988 ( 845) ( 7.6%) 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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