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Market Sentiment, Tuesday, 11/18/2003

Is The Top Behind Us?
By J. Brown

The major U.S. stock indices (DJIA, S&P 500, and the NASDAQ Composite) have all broken their rising simple 50-dma's. This is certainly a bearish technical development and given the rise in the volatility indices one begins to wonder if the markets have finally put in a short-term top.

Market internals were bearish as the DJIA and NASDAQ closed lower for their fourth decline in a row. Decliners out paced advancing stocks 17 to 11 on the NYSE and 15 to 14 on the NASDAQ. The Big Board saw most of the selling with down volume twice as strong as up volume. Only four of the 30 Dow Jones Industrial components closed in the green.

Yesterday's late day bounce appeared to have "buy the dip" written all over it but the follow through failed to appear Tuesday morning. Making headlines were growing concerns over the U.S. dollar, which is trading near its lows against the Japanese yen and the euro. The weak dollar is fueling the rise in gold and the shiny metal is trading above the $400 mark in after hours tonight.

Looking at the technical indicators below (in the sentiment) traders will notice that the short-term 5-dma on the ARMS index or TRIN is fast approaching the 1.50 level. Typically readings over 1.50 tend to be bullish buy signals but last time the 5-dma hit the 1.65 mark before the markets turned. Plus, these TRIN signals tend to be a little early. It sounds like we have farther to fall.

Levels to watch involve the 1020 area on the SPX, the 1840-1850 area on the NASDAQ, and the 9500 mark on the DJIA. A breakdown below these support levels could denote a possible trend change and not just profit taking.


Market Averages

DJIA ($INDU)

52-week High:  9903
52-week Low :  7197
Current     :  9624


Moving Averages:
(Simple)

 10-dma: 9777
 50-dma: 9644
200-dma: 8924



	
S&P 500 ($SPX)

52-week High: 1063
52-week Low :  768
Current     : 1034


	
Moving Averages:
(Simple)

 10-dma: 1050
 50-dma: 1035
200-dma:  958


		
Nasdaq-100 ($NDX)

52-week High: 1453
52-week Low :  795
Current     : 1364



Moving Averages:
(Simple)

 10-dma: 1417
 50-dma: 1389
200-dma: 1213


		


We are finally beginning to see the volatility indices react and
the market top could now be behind us.  The question now is will
the selling continue?  

CBOE Market Volatility Index (VIX) = 19.11 +0.51
CBOE Mkt Volatility old VIX  (VXO) = 19.90 +1.08
Nasdaq Volatility Index (VXN)      = 29.65 +1.84



Put/Call Ratio Call Volume Put Volume Total 0.76 745,954 565,047 Equity Only 0.63 568,928 355,730 OEX 0.87 49,631 43,197 QQQ 0.84 45,598 38,306
Bullish Percent Data Current Change Status NYSE 72.9 - 1 Bull Confirmed NASDAQ-100 68.0 - 4 Bear Confirmed Dow Indust. 80.0 + 0 Bull Correction S&P 500 79.2 - 2 Bull Confirmed S&P 100 79.0 - 1 Bull 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: 1.46 10-dma: 1.29 21-dma: 1.20 55-dma: 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 1133 1410 Decliners 1701 1570 New Highs 167 166 New Lows 21 28 Up Volume 501M 521M Down Vol. 1091M 634M Total Vol. 1602M 1173M M = millions
Commitments Of Traders Report: 11/11/03 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 Commercial traders continue to stall on making any big bets. They remain slightly net short in the big S&P contracts. We see the same hesitation in the small traders with little overall change. Commercials Long Short Net % Of OI 10/21/03 394,176 411,246 (17,070) (2.1%) 10/28/03 391,596 412,498 (20,902) (2.6%) 11/04/03 391,079 415,136 (24,057) (3.0%) 11/11/03 389,965 415,259 (25,294) (3.1%) 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 10/21/03 136,643 88,290 48,343 21.5% 10/28/03 137,791 76,791 61,000 28.4% 11/04/03 137,829 78,206 59,623 27.6% 11/11/03 136,072 74,249 61,823 29.4% 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 Hmm... now we are seeing some action in the e-minis. Commercial traders have eliminated 12K short contracts and upped their longs by 7K. This has narrowed the gap but they remain net short. Small Traders have made big changes and reduced a big chunk (40K) of their long positions and 12K of their shorts but they remain net long. Commercials Long Short Net % Of OI 10/21/03 226,985 236,906 ( 9,921) ( 2.2%) 10/28/03 220,171 260,644 (40,473) ( 8.4%) 11/04/03 242,409 270,785 (28,376) ( 5.5%) 11/11/03 249,864 258,503 ( 8,639) ( 1.7%) 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 10/21/03 168,236 56,564 111,672 49.7% 10/28/03 123,569 59,742 63,827 34.8% 11/04/03 135,525 63,006 72,519 36.5% 11/11/03 94,649 51,815 42,834 29.2% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Unfortunately we still don't see any big changes in the NDX futures from the Commercial traders. They have slowly been upping their short positions, which is bearish for the tech-heavy NDX. Meanwhile small traders are at their most bullish in four weeks. Sounds like a potential top. Commercials Long Short Net % of OI 10/21/03 36,314 43,305 ( 6,991) ( 8.8%) 10/28/03 36,168 46,272 (10,104) (12.3%) 11/04/03 34,159 48,293 (14,134) (17.1%) 11/11/03 35,889 49,201 (13,312) (15.6%) Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 9,068 - 06/11/02 Small Traders Long Short Net % of OI 10/21/03 16,917 9,750 7,167 26.9% 10/28/03 21,640 8,830 12,810 42.0% 11/04/03 24,132 9,703 14,429 42.6% 11/11/03 26,212 10,730 15,482 41.9% 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 Commercials still aren't making big bets in the INDU futures and remain net long. Small traders are hedging their bets a bit by upping their longs and reducing their shorts by about 1,000 contracts each. Commercials Long Short Net % of OI 10/21/03 16,876 9,037 7,839 30.3% 10/28/03 20,504 11,366 9,138 28.7% 11/04/03 21,756 11,903 9,853 29.3% 11/11/03 20,209 11,660 8,549 26.8% 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 10/21/03 5,392 8,842 (3,450) (23.1%) 10/28/03 5,295 8,864 (3,569) (25.2%) 11/04/03 5,099 9,160 (4,061) (28.5%) 11/11/03 6,105 8,201 (2,096) (14.7%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 8,523 - 8/26/03


 

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