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Market Sentiment, Sunday, 12/07/2003

Considerable Period
By J. Brown

Last week was an intriguing start to December. The headlines produced a roller coaster effect. The strong ISM numbers on Monday sent us soaring higher as most coasters do at the beginning of the ride before the dips begin. Profit taking, a negative investor reaction to Intel's mid-quarter conference call, a warning from JetBlue and a disappointing employment number left the NASDAQ lower on a week it touched 2000.

The big news on Friday was of course the jobs report. Estimates had been for a gain of 140,000. October's report had been +126,000 and economists were excited to see month over month gains. Unfortunately, the November report was a disappointment with just 57,000 jobs gained. The good news was an upward revision to 137,000 for the October report but this was just old news by now, especially given the "whisper" number of +250,000 jobs in November.

Overall unemployment dropped to 5.9% reaching an eight-month low but as many analysts pointed out this is not due to job growth. The most probable theory is drop off in the reportable figures. Thousands of workers who couldn't find a job have run out of unemployment benefits and could no longer be counted.

The major focus next week will be the Federal Reserve meeting on Tuesday. The verdict on interest rates should be out at 2:15 PM ET on Tuesday afternoon. There has been much ado made about the term "considerable period" in the FOMC's previous statements regarding how long they plan to keep rates low. Since no one expects them to raise rates the real focus is on what they have to say regarding the current state of the economy and when they might lift rates in the future. In this weekend's wrap Jim gives a good argument on why we may not see a rate hike until the first quarter of 2005. Whether or not the words "considerable period" are in this Tuesday's comments it may be replaced by a new phrase suggesting that the Fed is in no rush to raise rates.

As we have suggested in the past the market's gains are being tempered by investors taking profits near the highs. Most money managers are looking at their first profitable year since 1999. There is not a lot of desire to chase stocks higher when we're so close to the year-end. However, I will note that commercial traders have suddenly become bullish in the e-minis future contracts. Commercial traders, normally thought of as the "smart money", have reversed from being net short to net long. This can be viewed as a bullish sentiment indicator.

I would not be surprised to see the markets dip again this week but there are a large number of stocks that have pulled right back to support. It's going to be another tug-of-war for direction. Keep an eye on retail stocks. They took a beating this last week and the massive snowstorm on the east coast, dumping 12 to 20 inches of snow this weekend, is not going to help their holiday sales. The other side of that coin should be a strong surge in online shopping.

Good luck. We only have 18 shopping days left to Christmas day.


Market Averages

DJIA ($INDU)

52-week High:  9942
52-week Low :  7197
Current     :  9862


Moving Averages:
(Simple)

 10-dma: 9812
 50-dma: 9711
200-dma: 9027



	
S&P 500 ($SPX)

52-week High: 1074
52-week Low :  768
Current     : 1061


	
Moving Averages:
(Simple)

 10-dma: 1059
 50-dma: 1043
200-dma:  971


		
Nasdaq-100 ($NDX)

52-week High: 1453
52-week Low :  795
Current     : 1406



Moving Averages:
(Simple)

 10-dma: 1418
 50-dma: 1400
200-dma: 1239


		


Insert broken record commentary here...the "fear" indices 
continue to show very little concern by investors as they trade 
near multi-year or all-time lows.  Yet we have seen a slight 
up tick in the trend, but we've seen before.

CBOE Market Volatility Index (VIX) = 17.09 +0.79
CBOE Mkt Volatility old VIX  (VXO) = 17.34 +0.78
Nasdaq Volatility Index (VXN)      = 27.05 +0.24



Put/Call Ratio Call Volume Put Volume Total 0.54 585,094 491,146 Equity Only 0.68 494,881 335,345 OEX 1.04 24,450 25,318 QQQ 7.06 13,620 96,175
Bullish Percent Data Current Change Status NYSE 73.8 + 0 Bull Confirmed NASDAQ-100 74.0 + 0 Bear Correction Dow Indust. 80.0 + 0 Bull Correction S&P 500 81.8 + 0 Bull Confirmed S&P 100 80.0 + 0 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: 1.17 10-dma: 1.06 21-dma: 1.16 55-dma: 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 1161 1044 Decliners 1628 2012 New Highs 213 106 New Lows 10 12 Up Volume 435M 320M Down Vol. 999M 1299M Total Vol. 1468M 1643M M = millions
Commitments Of Traders Report: 12/02/03 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 Long and short interest continues to flat line from the commercial traders. Everyone seems to be waiting for the year to end before changing their bets. Small traders have grown slightly more optimistic. Commercials Long Short Net % Of OI 11/04/03 391,079 415,136 (24,057) (3.0%) 11/11/03 389,965 415,259 (25,294) (3.1%) 11/18/03 393,893 414,442 (20,549) (2.5%) 12/02/03 394,531 414,223 (19,692) (2.4%) 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 11/04/03 137,829 78,206 59,623 27.6% 11/11/03 136,072 74,249 61,823 29.4% 11/18/03 147,842 80,047 67,795 29.7% 12/02/03 154,788 85,776 69,012 28.7% 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 Wow! We're actually seeing some action here in the e-minis. Commercial traders have reversed from being net short to net long. This is bullish news. Small traders have added strongly to both their long and short positions and remain bullish as well. Commercials Long Short Net % Of OI 11/04/03 242,409 270,785 (28,376) ( 5.5%) 11/11/03 249,864 258,503 ( 8,639) ( 1.7%) 11/18/03 249,286 264,083 (14,797) ( 2.9%) 12/02/03 283,199 268,833 14,366 2.6% 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 11/04/03 135,525 63,006 72,519 36.5% 11/11/03 94,649 51,815 42,834 29.2% 11/18/03 95,119 61,975 33,144 21.1% 12/02/03 119,555 77,609 41,946 21.3% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Much like the large S&P contracts above, commercial traders have fallen asleep. There is very little change in positions. Meanwhile, small traders have reduced positions on both sides of the equation. Commercials Long Short Net % of OI 11/04/03 34,159 48,293 (14,134) (17.1%) 11/11/03 35,889 49,201 (13,312) (15.6%) 11/18/03 35,608 49,689 (14,081) (16.5%) 12/02/03 35,569 48,552 (12,983) (15.4%) 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 11/04/03 24,132 9,703 14,429 42.6% 11/11/03 26,212 10,730 15,482 41.9% 11/18/03 32,034 10,356 21,678 51.3% 12/02/03 21,594 9,429 12,165 39.2% 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 The same story appears to hold true for DJ futures. The overall trend is flat with commercials slightly bullish and small traders generally bearish. Commercials Long Short Net % of OI 11/04/03 21,756 11,903 9,853 29.3% 11/11/03 20,209 11,660 8,549 26.8% 11/18/03 20,746 11,080 9,666 30.4% 12/02/03 21,128 12,379 8,749 26.1% 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 11/04/03 5,099 9,160 (4,061) (28.5%) 11/11/03 6,105 8,201 (2,096) (14.7%) 11/18/03 5,655 8,607 (2,952) (20.7%) 12/02/03 6,667 9,302 (2,635) (16.5%) 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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