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Market Sentiment, Tuesday, 12/21/2004

Checking His List
By James Brown

Santa has been making his list and checking it twice. It looks like the bulls came up on the nice side and the seasonal "Santa Claus" rally may have begun. According to the Stock Trader's Almanac the January effect actually tends to begin around mid- December which then leads into the real Santa Claus rally which is typically the last five days of December and the first two trading days in January. Altogether it adds up to a very bullish time of year for equities and the new 3 1/2 year highs for the Dow Industrials really helps set the holiday mood.

Overall market internals were pretty good. The number of advancing stocks out weighed decliners by almost 3-to-1 on the NYSE and about 2-to-1 on the NASDAQ. Up volume was about three times stronger than down volume on both exchanges. Speaking of volume the overall volume totals were pretty good considering there are just two trading days left to Christmas.

There were some pretty big declines in the volatility indices. The VIX slipped 2.3 percent to hit 11.55. The VXO (or old VIX) fell about 15 percent to 11.52. The VXN fell almost 7 percent to close at 16.95. That is a new all-time low for the VXN and the VIX is nearing new ten-year lows. What does this mean? It means bullish sentiment is hitting extremes. Normally at these levels we'd be talking about a potential top but we suspect that the volatility indices will continue to drop as stocks climb towards New Year's Eve.


Market Averages

DJIA ($INDU)
52-week High: 10765
52-week Low :  9708
Current     : 10759

Moving Averages:
(Simple)

 10-dma: 10637
 50-dma: 10334 
200-dma: 10240 


	
S&P 500 ($SPX)

52-week High: 1207
52-week Low : 1060
Current     : 1205

Moving Averages:
(Simple)


 10-dma: 1193
 50-dma: 1157
200-dma: 1125

		
Nasdaq-100 ($NDX)

52-week High: 1635
52-week Low : 1301
Current     : 1609

Moving Averages:
(Simple)

 10-dma: 1609
 50-dma: 1538
200-dma: 1452

		



CBOE Market Volatility Index (VIX) = 11.55 -0.28 
CBOE Mkt Volatility old VIX  (VXO) = 11.52 -2.09
Nasdaq Volatility Index (VXN)      = 16.94 -1.27 


Put/Call Ratio Call Volume Put Volume Total 0.79 783,169 620,054 Equity Only 0.51 141,297 289,787 OEX 1.07 16,019 17,237 QQQQ 2.57 17,456 44,883
Bullish Percent Data Current Change Status NYSE 76.0 - 0.3 Bear Correction NASDAQ-100 78.0 + 1 Bull Confirmed Dow Indust. 70.0 + 0 Bull Confirmed S&P 500 77.0 + 0.4 Bull Confirmed S&P 100 77.0 + 0 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-dma: 1.04 10-dma: 1.02 21-dma: 0.98 55-dma: 1.07 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 2104 1984 Decliners 746 1058 New Highs 279 142 New Lows 8 12 Up Volume 1444M 1467M Down Vol. 390M 478M Total Vol. 1857M 1982M M = millions
Commitments Of Traders Report: 12/14/04 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 upped their positions in both longs and shorts with the net result as a decrease in their bearish bias. Small traders did the same but with a net result in a decrease in their bullish bias. Commercials Long Short Net % Of OI Commercials Long Short Net % Of OI 11/23/04 462,408 491,384 (28,976) (3.0%) 11/30/04 462,394 491,813 (29,419) (3.0%) 12/07/04 450,072 498,057 (47,985) (5.0%) 12/14/04 502,471 540,494 (38,023) (3.6%) 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 11/23/04 171,192 150,606 20,586 6.4% 11/30/04 176,031 148,876 27,155 8.3% 12/07/04 187,707 135,776 51,931 16.0% 12/14/04 201,428 164,111 37,371 10.2% 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.. we have some interesting movement here. Commercials upped both their longs and shorts but their bearish bias has been slowly decreasing for weeks. Meanwhile the small traders more than doubled their short positions putting a serious dent in the overall bullish bias. Commercials Long Short Net % Of OI 11/23/04 412,724 849,091 (436,367) (34.6%) 11/30/04 439,074 855,440 (416,366) (32.2%) 12/07/04 470,553 805,234 (334,681) (26.2%) 12/14/04 556,980 899,616 (342,636) (23.5%) Most bearish reading of the year: (436,367) - 11/23/04 Most bullish reading of the year: 133,299 - 09/02/03 Small Traders Long Short Net % of OI 11/16/04 445,737 70,169 375,568 72.8% 11/23/04 400,995 62,080 338,915 73.1% 11/30/04 386,665 67,926 318,739 70.1% 12/07/04 311,838 66,496 245,342 64.8% 12/14/04 398,915 137,598 261,317 48.7% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 We are seeing some interesting movement here too. Commercial traders significantly raised their positions in both longs and shorts with a serious drop in their bullish bias as the net effect. Meanwhile small traders added a huge chunk of new longs compared to a significant jump in shorts with the net effect being a sharp drop in their bearish bias. Commercials Long Short Net % of OI 11/23/04 58,159 34,104 24,055 26.0% 11/30/04 56,629 30,571 26,058 29.8% 12/07/04 57,621 34,313 23,308 25.4% 12/14/04 73,554 50,286 23,268 18.7% Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 26,058 - 11/30/04 Small Traders Long Short Net % of OI 11/23/04 11,153 39,712 (28,559) (56.1%) 11/30/04 9,902 44,779 (34,877) (63.7%) 12/07/04 15,489 49,064 (33,575) (52.0%) 12/14/04 26,781 58,159 (31,378) (36.9%) Most bearish reading of the year: (34,877) - 11/30/04 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Commercial traders added significant amounts to both their long and short positions with a net decrease in their bearish bias. Small traders also poured a lot of new money into both their long and short positions with the net effect as a decrease in their bearishness. Commercials Long Short Net % of OI 11/23/04 22,527 25,537 (3,010) (6.2%) 11/30/04 22,622 25,411 (2,789) (5.8%) 12/07/04 25,523 27,351 (1,828) (3.4%) 12/14/04 36,960 38,566 (1,606) (2.1%) 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 11/23/04 5,833 8,299 (2,466) (17.4%) 11/30/04 5,739 8,536 (2,797) (19.6%) 12/07/04 5,274 9,507 (4,233) (28.6%) 12/14/04 13,445 19,089 (5,644) (17.3%) 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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