Market Indicators - Investor Sentiment

» hairie31 - AAII: 42.51: Bearish

Bulls: 31.5
Bears: 42.6

First Bearish reading in a year.

2003 AAII low was 26.71 on 2/22/03
Bulls: 21.1
Bears: 57.9

So is this the beginning of a long, deep,bearish trend or will the makret rally off this?

Last Investors Intelligence: 66.18

Stock Trader's Almanac lists
April 5th as the day to begin looking for a MACD seasonal Sell Signal.

May 3, 2004, is the first trading day of the traditional seasonally bad 6 month period.(May 1st to October 31)

-- posted by hairie31

» SteveT - 3-29-04 Sentiment

I am using the VTO report for the II data. http://vtoreport.com/sentiment/sentiment...
Note for clarification historic sentiment tables are for that current week and not the four-week moving average.

Investors Intelligence Bulls 45.4% Bears 23.2% Correction 31.4%
45.4/(45.4+23.2)=66.18%
Four Week Average = 71.71%

A few historic dates: 7-20-98 68.42% 10-12-98 47.41% 4-3-00 67.79% 1-1-01 64.10% 4-4-01 58.91% 9-17-01 52.0% 9-21-01 48.7% 7-19-02 47.2% 7-23-02 47.2% 10-9-02 50.0%

Sideline Money Bears + Correction =54.6%
Four Week Average = 46.65%
hairie has researched some fascinating numbers for all time high bulls readings going back to 1965. http://www.suite101.com/discussion.cfm/i...
and lows from 1965-2003 http://www.suite101.com/discussion.cfm/i...

From Barron' s 3/29/04
The American Association of Individual Investors
Bulls 31.5% Bears 42.6% Neutral 25.9%
31.5/(31.5+42.6)=42.51
Four Week Average = 57.93%

Historic dates for comparison:
7-16-98    44.3%        S&P 500 Close 1186.75
10-12-98   36.76%       S&P 500 Close  984.39
4-3-00     77.78%       S&P 500 Close 1505.97
1-1-01     58.82%       S&P 500 Close 1320.28
4-4-01     51.35%       S&P 500 Close 1103.25
9-10-01    47.34%       S&P 500 Close 1085.78
9-17-01    42.11%       S&P 500 Close 1038.77
9-21-01    41.08%       S&P 500 Close  965.80
7-19-02    32.88%       S&P 500 Close  847.75
7-23-02    32.88%       S&P 500 Close  797.70
10-9-02    42.36%       S&P 500 Close  776.76

As of March 26, 2004 close
The CBOE Put/Call ratio 10 day moving average is at .87. http://stockcharts.com/def/servlet/SC.we... The VIX Market Volatility Index closed Friday at 17.33. http://quote.yahoo.com/q?s=%5evix&d=t

-- posted by SteveT

» hairie31 - Invest Intell: 64.78 Still Bullish

Bulls: 46
Bears: 25
----------------
Last AAII: 42.51 (Bearish)
Bulls: 31.5
Bears: 42.6
----------------
Vicker's Sell/Buy Ratio: 6.78
-----------------
Vix Index (3/30/04) 16.28
Bears 42.6

-- posted by hairie31

» Normxxx - Cheers - Bar Room Stock Market Talk

http://www.suite101.com/discussion/post....

by Martin Goldberg | 1 April 2004

My focus today is thoughts that are best expressed in a barroom with the responsible consumption of one or two beers. This is part of my social life that I sometimes miss since devoting some of my spare time to the stock market and FSO, and I would like to make up for some of that tonight. I would like to express some thoughts about corporate governance.

Woody: What do you think About Martha Stewart? Was she guilty?

Martin: Martha Stewart? In September, mutual funds were caught stealing via late trading, and they are only getting a slap on the wrist, while the idiot public puts record amounts into mutual funds not equaled since March of 2000! And instead of complete coverage of exactly what they did to steal from us, and how much they stole, for corporate governance coverage we get practically nothing but “Martha, Martha, Martha”. Now consider, the mutual funds were taking money practically right out of our pockets via late trading. We are just here working if we are lucky, having a beer afterward and trying to save for our kid’s college education. And now some fund manager is going to basically break into my accounts, and take money from my kids, my wife, and me. And what’s even more surprising is that the Securities and Exchange Commission (SEC) was basically silent on the situation until Eliot Spitzer caught the funds red-handed. The SEC got into the game only afterward. And CNBC has the galls to question Mr. Spitzer’s motivation a few weeks later on a “Squawk Back Question”. “Was Eliot Spitzer politically motivated?” The nerve. Only in America! I wonder sometimes if the failure of any one to do anything before Mr. Sptizer about late trading was “politically motivated”.

If someone gets rolled in the red light district, I understand that someone committed a crime and should probably be punished. But if they don’t get punished, what do I care? I don’t go into the red light district; and if I did, I would know that getting rolled was a distinct possibility. So Martha Stewart may have traded a couple thousand shares of Imclone based on something she may have known. The average share of Imclone was turned over about once a month at that time. So basically the stock is flipped once a month and is an item of speculation or gambling, and probably little else. So the way I figure it, the guy who bought Martha’s shares should have known that he could lose because he was trading in the red light district. But you and me? We’re not in any red light district! We’re just trying to save and invest for our kid’s college. So when some guy in a suit from a mutual fund violates my space, and takes money from my pocket, I become mad. And when the press says relatively little about this crime, yet bombards me with hours of coverage of Martha Stewart and the couple thousand shares of Imclone, I have to figure that some thing just is not right with the news media. But most people, they don’t care. This is because their stocks and mutual funds are going up. And the stealing is more abstract to them compared to if fund managers actually came in here and literally picked their pocket. You can bet that if their pockets were picked here, they would be quite angry.

Frankly I don’t care about Martha Stewart. And it irks me that a lot of people do care about her. You know what? When this bubble bursts, everyone is going to care about these things, double. But it will be too late for the people who held on too long.

You know, I even saw a commercial for Putnam during the St. Joe’s versus Oklahoma State game on Saturday night. And it was one of the typical mutual fund commercials. About what great fiduciaries they are. How careful and thorough they are. No apology either, which surprised me for about a split second. Now that’s major gall! I would not have cared if there were a commercial for a Martha Stewart product during the game though.

Woody: If the correction in the USA had not occurred, would the Dow be at 20,000 by now, or the NASDAQ at 10,000?

Martin: Greenspan made the irrational exuberance speech in December of 1996.The market was out of control then. It was also lower than it was now by a lot. No one wanted to take away the speculative punch bowl. And it got worse from there. The bubble never ended in my view. The market had to come down from Pluto and now it’s on Mars. The Nasdaq would never have gone to 10,000. Consider that many of the companies making up Nasdaq 5,000 do not even exist any more. Remember that Wall Street sold those companies to the public. No business plan. No plan at all except for selling shares to the public. When the Nasdaq was at 5,000, many of these companies were “worth” tens of billions of dollars. El Cito (remember the commercial of the guy trying to urinate into the tall urinal with stilts?), Dr. Koop.com, Firepond.com, Metrocom, Internet.com (an actual company), Looksmart, Flag Telecom, Lifeminders.com, the list goes on and on and on. I keep a March 2000 Barron's just as a reminder. And these "companies" were sold to the public by the likes of the most well regarded investment banks in the world. And the only ones who were personally punished for these crimes were a few scapegoats like Jack Grubman, and Henry Blodget. What happened to those two worked just great in personalizing the situation to the public and making them feel like justice was served. But these guys didn’t operate in a vacuum like the mainstream sound-bite media would have you believe. Look here. I have a March 20, 2000 Barron’s. On page 27 is a red herring for the sale of 6 million shares of “Avenue A” stock at $24/share. The investment bankers involved were Morgan Stanley, Smith Barney, Thomas Weisel, Dain Rauscher, Janney Montgomery Scott, Raymond James, U.S. Bancorp, First Union, Edward Jones and Wit Soundview. So who was held personally responsible for this ill-fated secondary offering? Just the public who lost practically all of their money was ultimately held responsible for that one. And they got what they deserved, although I can’t say the same for the bankers. There were hundreds of cases like that one too! So for the Nasdaq to have gone to 10,000 would have required that these fraud businesses stay in business, and even grow. And even in that crazy emotionally charged time of excess, this was totally impossible.

The SEC and the administration eventually settled for a token fine for the chicanery, just to let the speculation game continue. So much of the financial sector’s profits depend on our active and beloved stock market. And the band plays on! Just look at that upgrade chart in last week’s Market WrapUp. And Wall Street cheers when these guys (themselves) report earnings that beat their own "expectations". (All the while they are unloading shares on the public.) “Goldman upgrades, Merrill... Merrill upgrades Smith Barney… Smith Barney upgrades Morgan Stanley... Morgan Stanley upgrades Goldman…” Then they all upgrade Intel and Cisco… I suppose that an overpriced stock market is an integral part of the so-called economic recovery. Speculate at your own risk!

I need another beer. Ike, what do you think of tech stocks?

Ike: I am negative not on technology, but on technology companies and executives. In the ‘90s, they used their position to become wealthy, regardless of the value that they delivered. Premiere technology companies, Applied Materials, for example. Applied Materials posted a loss for fiscal 2003. In fact, revenues went down almost 12 percent. Yet this company’s employees got $355 million from gains from exercising stock options last year. This is very common in technology.

When you have a company and its losing money, the price of the stock should go down. And yet people made $355 million from exercising stock options. I find it immoral to buy the stock. In fact, I think the managements of companies like this belong in jail. The morality of many of the technology company executives just does not exist. I would stay away from tech stocks for this reason. I could not justify buying most of them, including the mother of all frauds, Cisco.

Martin: You are not entirely off the wall in my view, Ike. But I think jail may be a little strong in some cases. Figure most of these companies are in tough, competitive businesses - even Cisco. This is contrary to what Wall Street would have investors believe. Yesterday, I went into Circuit City for some new headphones, and looked at the wireless router section. Guess what? In addition to Linksys, which is owned by Cisco, there were four other brands, all priced within a few bucks of each other. Cisco decided to buy Linksys for stock less than a year ago. So if Cisco’s business were so great with no competition, then why would they buy into such a tough low margin commodity business? Synergy, right! Separate from what they make for themselves in stock options, they have to fight hard for every penny that they make for their shareholders.

If I was Cisco management or some other technology company manager facing tough competition, demand that comes and goes, and inventory issues, and had the opportunity to pay employees with overvalued stock options instead of cash, that’s probably what I would do. The silly stock market and Wall Street makes it possible, and technology management takes advantage of the stock option opportunity. But it’s also disturbing that management also pays themselves with options. The size of rewards they then take from the stock market and John Q is obscene. But do they belong in jail? What about the Wall Street analysts who issue “Buy” recommendations and promote these overvalued businesses’ stocks with very shaky fundamentals. What about the corporate board members that let this happen? If the tech managements belong in jail, where do these guys belong? When the market corrects back to its value or less as has happened every time throughout history, then there will not be the opportunity to pay with overpriced stock options. It will probably come to a point where cash would be the most cost effective means of compensating employees and those management executives that did not yet retire to a warm island on the public’s nickel.

Woody: What did you think of Jim Puplava’s assessment that people “love” Cisco?

Martin: Woody, it’s great that you are reading more. And you are reading critical commentary from FSO, and not relying entirely on “bubble vision” which plays here at the bar most of the time. JP provides a great critique of Cisco’s lack of fundamentals and absurd valuation. But I don’t entirely agree with him about the “love” part. I don’t think people “love” Cisco anymore. It’s lust only, not love. They may have loved Cisco in the ‘90s. At that time, many people thought, as with marriage, the love would last a lifetime. Cisco was a one-decision stock. Buy and hold forever, was the mantra, just like marriage. But Cisco cheated on its shareholders with the help of Wall Street by portraying itself as a company that could grow at a double-digit rate forever. Cisco wears a lot of makeup! And those who believed that story the longest were left the most broken hearted. After that happened, most people wanted Cisco entirely out of their life. But at an out-of-hand party after the first phase of Iraq in October of 2002, Cisco (and a lot of her friends), were looking real good to intoxicated fund managers and the E-Trade crowd. The fling began then. As with many love affairs that go bad, people are having a second fling with Cisco. But no one feels that this is the kind of relationship that will last a lifetime, or even more than a few months. Frankly, I’m surprised the fling lasted as long as it did so far. Once the passion dies down (Cisco stops “performing”), people will remember why they dumped Cisco in the first place. When this fling ends, it will end suddenly, and could result in a stock market crash. Woody, haven’t you seen similar behavior in this bar before?

Woody: Don’t you think you should discuss your thoughts with Dr. Fraser? He may be able to help you with this.

Martin: Thank you Woody. You are probably right. I will.

Today’s Market

Since we last spoke, as you know, there has been an apparent complete turnaround in many key markets. After last Thursday’s 55-point impressive rally, the Nasdaq has been on a tear, point-wise, and less so on the basis of volume. The Dow Transports have been on a similar trajectory, and the upside volume has been more impressive, but still nothing to write home about. The Dow, S&P 500 and S&P Small Cap indices all sit at key resistance points. The Nasdaq has for now, broken back above the support/resistance/psychological level of 2,000, but not decisively. The bottom line is that we are at a very important cross roads in the stock market. To quote baseball manager Gene Mauch, “its either going to be hit on the ground or in the air”. That’s how I feel about what the charts are telling me. This market has done nothing but trend up or down for a decade. There have been relatively little times of maintaining a trading range. While placing your bets on the winning numbers has been rewarding, being wrong (and stubborn) has been expensive. We are at an important crossroad in the markets, as resistance lines from the most recent “healthy correction” are tested from below.

Bonds are approaching the former support line that is now resistance. On a short-term basis, the dollar’s short-term resistance was taken out today. How about that gold and silver! Silver torched the $8/per ounce today.

Gold is no longer a measure of weakness in the dollar. It now may be turning into a measure of weakness in world currencies.

-- posted by Normxxx

» hairie31 - AAII 71.13: Back to Bullish

71.13

Bulls: 55.2
Bears: 22.4
----------------
Last Investors Intelligence:

64.78

Bulls: 46
Bears: 25

-- posted by hairie31

» Normxxx - Street Sentiment

As many of you know we've been very bearish for the past two earnings report periods - the first starting in October of 2003 and second beginning in January 2004. That bearishness has paid off as the October earnings season rudely interrupted the bull market. Then in January of this year, the bull market appeared to die as stocks hit a wall and moved lower thru the quarter.

Unfortunately, we're still bearish. Worse yet, we're even more bearish short-term or over the next 3 to 4 weeks, which just happens to coincide with the three busiest weeks in the upcoming Earnings Season.

If there is one silver lining for the upcoming quarterly report period, it could be that investor expectations have fallen. Currently only 57% of all individual investor expectations are higher or equal to that of the Wall Streets consensus targets. In past comparable time frames, that number has been higher than 70%.

You may be thinking - why wouldn't lower expectations make us bullish?

They might have, but we don't think that even these lower expectations, given the overall high levels of investor sentiment, are low enough to create a so-called earnings rally. It does indicate one thing - the poor market performance in the past 3 months has rattled investors and their expectations for corporate earnings are starting to move lower. But we're not yet to a point where we think earnings are the catalyst to move stocks higher.

You'll find Joe Cooper spinning pro-forma analyst estimates for First Call on many of the 'bubble vision' media outlets like CNBC, Bloomberg, Marketwatch.com, and theStreet.com. And as we've noted before and will continue to - buyer beware. First Call and the media messengers may appear to have your best interests in mind, but in reality this is far from the truth. A good example is CNBC's Jim Cramer. Every night for 3 straight months, we would check in (briefly) to hear Wall Street's greatest cheerleader tell his listeners that stocks are ready to rebound as the sell-off is near an end. Words like 'oversold' and 'extended' were often used in his daily diatribe. And for 3 straight months, stocks continued to fall.

And recently, one of CBSMarketwatch.com's founders and principals, Thom Calandra, was fired for alleged stock front running and promotion of a gold penny stock. And you can't forget, CNBC's Joe Kernen and David Faber, always making fun of analysts (calling them penguins), as they then turn to their right or left to interview, no other than - an analyst. We have to ask - just who are the penguins?

But let's get back to Thomson/First Call. This week via Mr. Cooper and The New York Times Sunday Edition, First Call stated that they expect the strongest upcoming earnings growth this quarter to be in the Basic Material and Technology sectors. Interestingly enough they felt the same way last quarter. (If you recall, we didn't feel that way). In fact we literally walked you through the charts of Alcoa (AA), International Paper (IP) and several others Basic Mat's stocks to make our case. And by the looks of the performance of Basic Mat's and Tech stocks, we were right.

The other sectors First Call stated will be hot are in energy and lodging. Based on investor sentiment from our other investor services, we predicted last week an end to the oil rally. Two days later, the price of crude oil topped and has since fallen over $4.00 per barrel. We anticipate that the leading oil stocks may follow the price of crude lower. More on this next week as we'll review several oil and energy giants that will be reporting earnings later in the month.

As for lodging, this is a sector that interests us (meaning we are bullish on the group).

-- posted by Normxxx

» Normxxx - Insider Sales Bearish 11th Month

By Cal Mankowski, Reuters | 04.06.04, 2:50 PM ET

NEW YORK, April 6 (Reuters) - Sales of stock by U.S. corporate insiders flashed a bearish signal for the 11th straight month in March, although new data also showed the degree of bearishness decreasing.

Corporate executives sold $3.5 billion worth of their own companies' stock in March, Thomson Financial said. Although the selling was less than the February sales of $5.1 billion, it still topped the 5-year monthly average of $2.7 billion.

The month-to-month decline in insider selling also reflected seasonal trends.

Insider buying rose 33 percent, to $124 million, but was below the 5-year monthly average of $161 million. The ratio of sales to buys fell to 28.4 in March from 54.6 in February but remained above 20, a range considered bearish.

The March ratio was the 11th consecutive monthly bearish reading, a period which has coincided with the return of a rising stock market.

Lon Gerber, director of insider research for Thomson, noted that the ratio is considered a "leading" indicator, flashing its signal six to 12 months ahead of a change in the market.

"Based on what we've seen, we still have to say that the absolute sales value of $3.5 billion is a significant number," he said in an interview.

Buying is still at light levels, he said. "Both numbers basically are giving us confirmation that a bearish trend continues."

Fund managers said insider buying and selling trends can give important clues about individual companies, especially in the case of buying after a stock has fallen.

"So much compensation is tied to the stock price that it is somewhat unfair to expect them not to sell at higher prices," said Dan Bandi, chief investment officer for value equity at Integrity Asset Management in Independence, Ohio.

He said he gets worried if insiders are selling when the stock is dropping, "It's sort of like rats getting off a sinking ship."

"We tend to think more favorably of insider buying," said Wendell Perkins. chief investment officer for the Johnson Family Funds in Racine, Wisconsin. He said sometimes it may be very reasonable for insiders to be selling.

The March data showed Goldman Sachs Group Inc. (nyse: GS - news - people) director William George buying 20,000 shares with a market value of $2 million while the stock was at a three-year high.

Howard Gittis, a director of Revlon Inc. (nyse: REV - news - people) and long-time associate of Revlon's principal shareholder, Ronald Perelman, bought 150,000 shares. It was the first insider buying at the cosmetics-maker in two years.

At retailer Restoration Hardware Inc. (nasdaq: RSTO - news - people), four insiders, including the chief executive, bought a total of 247,205 shares.

Tenet Healthcare Corp. (nyse: THC - news - people) CEO Trevor Fetter and CFO Stephen Farber each bought 10,000 shares.

Prudential Financial Inc. (nyse: PRU - news - people) CEO Arthur Ryan made the first significant insider buy at the firm in a year with the stock near a high.

Eight executives of Hagerstown, Maryland-based Allegheny Energy Inc. (nyse: AYE - news - people) bought 112,000 shares, the first insider buying in two years.

Insiders of building products-maker Masco Corp. (nyse: MAS - news - people) were selling shares, with its stock near a four-year high.

http://www.forbes.com/markets/newswire/2...

-- posted by Normxxx

» Normxxx - The Market Is Saying. . . WHAT?

The Market Is Saying. . . WHAT?

Wednesday, April 14th, 2004 8:00pm EST

Bottom Line: The type of breadth readings we’ve seen the past two days have usually marked lows – or the beginning of waterfall declines. The action over the short-term should tell us which.

As you have no doubt heard by now, the selling yesterday was some of the most indiscriminate we’ve seen in a very long time – in fact, we would have to go back to October 1997 to see a larger number of stocks that declined on the day. It’s rather fruitless to look at the absolute number of declining issues over time, because the total number of stocks traded has of course increased. If 2,000 stocks decline today when there are 3,500 total stocks traded on the NYSE, that’s a lot different than, say, 1975 when there were half as many. So instead of looking at the absolute number of decliners, I think it’s much more instructive to look at them as a percentage of total stocks traded. When viewed in that manner, yesterday came in with 72% of all stocks being down on the day. That is still quite remarkable – over the past 40 years, or 9,847 trading days, yesterday’s percentage of declining stocks ranked #34.

These types of days bring out two distinct opinions depending on whether the speaker happens to be bullish or bearish – either it is evidence of a washout move that will allow the market to rally, or it is a sign of serious selling pressure that signals more selling to come. Both are nothing more than opinion, so if we look at the facts of what these days have typically preceded, we can get a better feel for who may be most likely correct.

We can see that the S&P typically outperformed an average day after seeing the type of broad selling pressure that we saw yesterday. After 10 days, the index was an average of 1.8% higher than an average day, and was positive 23% more of the time. Even after 60 days, the S&P showed a return 3.7% greater than average, and was positive 20% more of the time. After 60 days, the index was positive 82% of the time, as 27 out of the 33 instances were positive. There were two notable exceptions to this rule. The first one occurred in July 1974, as the S&P was 22% lower after 60 days. In October 1987, the index was 13% lower. The four other losses averaged 1.7%, so the damage was minimal other than those two. This compares to an average gain of 8.2% from the 27 winners.

The action today complicates matters somewhat (or simplifies them, depending on your perspective). The number of decliners on the NYSE today amounted to 55% of all issues traded – another fairly rare occurrence. Even rarer is to see two days in a row of at least 55% of all issues being down on the day, which we have seen over the past two days. Over the past 40 years, this has only occurred 20 times. While my natural instinct was to believe that if we saw one such day and it led to a very positive market, then two such days in a row probably would lead to an even more positive market. It turns out that that is not the case. When we saw two days in a row with a large percentage of declining stocks, it underperformed an average day. 60 days later, the S&P showed an average return of 0.2%, with 60% of the occurrences being positive.

In looking at the data, however, something notable popped out - how the market performed the first day after these two lopsided selling days had a good deal of accuracy in forecasting what was in store later on. If we look at those times where day following the two consecutive selling days was positive or negative, it appeared to have a great impact on whether the market would be higher 60 days later as well.

If the day after these two days was positive, then the S&P was higher 60 days later 9 out of 12 times, for an average return of 3.3%. If the day after was negative, however, then the S&P was higher 60 days later only 2 out of 7 times, with an average return of -4.9%. This “day after indicator” was the best predictor of future returns - better than looking at the first 3 days, 5 days or 10 days.

One reason, perhaps, is because this type of selling pressure on consecutive days tended to coincide with either the very low of a move, or the middle of a severe decline. For example, the last two instances were 7/23/02 and 3/30/94 – both of which nailed significant market lows. However, we also saw instances on 10/15/87 and 4/24/74 – both of which occurred during the middle of extreme selloffs.

If the market was not able to immediately recover from this severe selling pressure (as in 1987 and 1974), then it was a good tip-off that there was quite a bit more selling in store over the intermediate-term. If these selling days marked the low (as in 2002 and 1994), then it boded very well for the next few months. I never like to give too much importance to a single day, but it does seem as though the market action tomorrow, or the next couple of days at least, may be an important indication as to whether we are in the middle of a decline or near the end.

I want to note one other thing about today’s [4/14/04] breadth. While the number of declining issues far outweighed the number of advancers, down volume was not nearly as skewed – so even though there was widespread weakness today, the TRIN closed at 0.65. That is a reading more closely associated with overbought conditions than oversold, and is one of the reasons I have picked on the indicator from time to time. What today’s TRIN is telling us, essentially, is that the volume flowing into all those down issues was not as dramatic as the negative a/d figure would have us believe. I checked every other time where declining issues were at least 55% of the total number of stocks traded, and the TRIN closed at 0.75 or below. Interestingly, the S&P 500 was higher 60 days later 11 out of 12 times, and with an average gain of 6.9%. After 90 days the average return climbed to 8.7%, again with 11 out of 12 being positive. After 120 days, the return climbed again to 10.1%, though one of the instances slipped into negative territory.

TICK Talk

Bottom Line: A cumulative TICK measure is registering the most oversold reading since the low in October 2002, and underscores the importance of the next few days.

Another one of the remarkable notes about yesterday is the action in the TICK indicators. Recall that the TICK is simply the number of stocks that last traded on an uptick minus those that last traded on a downtick. It is calculated for the NYSE and the Nasdaq, updates continually throughout the day and typically ranges from -1200 to +1200. Yesterday the NYSE TICK barely traded above the zero line all day, but touched -1000 at least a dozen times. Today wasn’t a whole lot different for much of the day, and this activity has pushed our indicators that track that information to true extremes.

On the site, I update a cumulative TICK for both the NYSE and Nasdaq, which is really a summation of the last day’s activity. I also keep a similar cumulative TICK, though it takes a longer view and looks at the past three days. This indicator is now the most extended to the downside it has been since the low in October 2002, and the low in July 2002 prior to that.

I am always troubled when such overwhelming selling indications come after rallies and close to new highs, and I think it underpins the importance of the coming week. If we cannot rally off of these readings, then it would seem increasingly likely that this is an initial wave of selling that will be followed by still more.

Conclusion

I often read about certain times being “critical” for the stock or bond markets, and I think most of it is hyperbole. But from some of the readings we’ve seen over the past couple of days, it really does seem as though market action over the next few days could hold the key to where it ends up several weeks or even months from now. I have been saying that the readings we saw last month, and how the broad market reacted off of those readings, were consistent with an intermediate-term low – meaning we shouldn’t violate those lows anytime soon. I still believe that, but a few things over the past few days, such as the comments above, and the performance of REITs that I wrote about on Monday, have me back on my heels a bit. I’ve been looking at the 1120ish area on the S&P as a likely place for that index to reverse higher if it was going to, and we did indeed stop near there this afternoon. A violation of that general level will have me tempering my longer-term bullishness to some degree, but if we decline below the March lows, that would be the ultimate (and obvious) signal that something is very amiss with the uptrend.

Yesterday, I noted that a gap down open this morning would likely lead to something of a bounce, given how far oversold many of our short-term measures had become. We did get a bounce, and it was enough to relieve most of the indicators. We’re back to neutral again this evening, and once again I don’t have a high degree of confidence with a trade in either direction. We should see more of a rally in the coming days, and that is what I will be looking for, but I am leery of a failure here. If we cannot hold higher prices, we may well be in for a tough few weeks.

-- posted by Normxxx

» Normxxx - Newsletter ad doesn't add up

My indicator is based on how many liberties newsletter advertisers are taking with the truth. It varies widely over a market cycle.

For example, when the market's pendulum is at the fear end of the fear-to-greed spectrum, very few advertisers make outrageous performance claims. That's because investors are more preoccupied with preserving their capital than with taking risks.

At such times, greed doesn't sell very well. Ironically, this often signals that a market bottom is not that far off.

In contrast, my informal indicator shows that lots of liberties with the truth get taken when the pendulum swings to the opposite extreme. At such times, advertisers cater to investors' greed, promising outsized returns for those willing to subscribe to their clients' newsletters.

Extremes of greed, of course, more often than not occur near market tops.

Unfortunately for the bulls, recent newsletter ads incline me to believe that we're closer to the greed end of the spectrum.

The one ad in this regard that I want to discuss in this column (dated "Spring 2004") is for Stephen Leeb's newsletter, The Complete Investor. Among many claims made by the ad, the one that caught my attention read: "In recent years, Dr. Stephen Leeb has been rated as the #1 market timer by... Hulbert Financial Digest."

Several pages later, the same advertising brochure went on to say that the HFD has "given him [Leeb] other awards covering periods of five years, which puts him in a different league from advisors who shine in the #1 slot for a single year."

Unfortunately, I could not find any mention in the ad of the particular time periods over which the Hulbert Financial Digest supposedly rated Leeb as No. 1. And an e-mail of several weeks ago, asking Leeb's organization to identify those time periods, has gone unanswered.

Scanning the Hulbert Financial Digest myself, I found only one calendar year period in which the HFD rated Mr. Leeb's market timing advice to be No. 1. That was for calendar 1994, during which Leeb's timing model (known as the "Master Key") was in first place for risk-adjusted performance.

I'll leave to you the determination of whether 1994 qualifies as "recent," as claimed by the ad.

But more importantly, Leeb's longer-term record is nowhere near to being rated No. 1. For the more than 15 years for which the HFD has data for his timing model, the HFD reports that it lagged a buy-and-hold by 3.6 percentage points per year on an annualized basis.

The ad for Leeb's newsletter also claims high HFD ratings for an unspecified 5-year period. Yet I could find no five-year period in which the HFD had rated it to be No. 1.

Leeb's stock picking appears to have been no better than his market timing. The HFD has data for an 11-year period for several of Leeb's model portfolios, whose performances reflect not only his market timing but also his stock picking. These portfolios on average lagged the Wilshire 5000 by more than 8 percentage points per year on an annualized basis.

Since 1991, furthermore, Leeb has managed a mutual fund, currently called the MegaTrends (MEGAX: news, chart, profile) fund. According to Lipper, this fund since inception in October 1991 has produced a 6.8 percent annualized return. The Wilshire's comparable-period return is 11 percent annualized.

No doubt Leeb himself is an honorable man.

But what does it say about market psychology in general, and the health of this market in particular, when advertising for such a prominent adviser as Leeb can take such liberties with the truth?

-- posted by Normxxx

» hairie31 - Is the market going up or down?

Vix hit a new closing low 14.01 today.

Last Investors Intelligence: 70.01
Last AAII: 82.32

Hard to believe a major rally is going to start at this level.

-- posted by hairie31