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You want a bullish forecast from a veteran. This is from Chris Chadbury's
Option Premium Ratio at http://www.afund.com....scroll down to his name, click
and select Recent Comments. Its free on Mondays.
#1848 August 24, 1998 SHORT-TERM OUTLOOK
S.& P. 500: UP 2.9% TO 1113 OR MORE AT AUG. 28th CLOSE
S.& P. 500: UP 3.1% TO 1115 OR MORE AT SEP. 4th CLOSE
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COMMENTARY
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By seven different measures, the stock market has become more over-sold than
at any other time during the past three years.
(1) On Friday, for the first time in several years, more equity puts traded on
the CBOE than equity calls. The CBOE equity put-call volume ratio shot to
1.04.
(2) Last week Consensus revealed the lowest level of bulls in several years,
19%.
(3) In a poll taken on Friday, Market Vane found 32% bulls, also the lowest
level in several years.
(4) Last week AAII announced 25% bulls, a 3-year low.
(5) The option premium ratio reached a seven-year low of .29 on the low of
Aug. 4th.
(6) For the first time in the past seven years, the CBOE equity put-call
volume ratio has been around a market-basing level in 12 out of 16 sessions.
(7) For the first time since 1994, large down-tick readings have been recorded
around the low of the day in most of the sessions during a 5-week period.
Probably Friday's intraday high of 4.91 for the Arms Index was the highest
reading of the year, and the reading at the low, 4.23, the highest reading at
a daily low this year (Ord: 402-486-0362). On Friday the VIX index closed
above 30 for the 7th time in 14 sessions. Greatly oversold markets often lead
to huge rallies, particularly when the equity funds continue to receive new
capital. In the week through last Wednesday, the equity funds took in $2.7
billion net. A move by the S.&P. 500 to the 1250-level and a move by the Dow
to 10,000 are entirely possible by early next year.
On Friday the S.&P. 500 successfully tested the area of the 200-day moving
average for the fourth time and rallied 3! points to the close, 1081. The
September S.&P. 500 futures successfully tested the area between 1055 and 1061
for the fifth time and rallied 33 points off the quintuple bottom to the
close. The Dow successfully tested the area near 8300 for the third time and
rebounded 205 points to end at 8534. The Nasdaq Composite fell to about 10
points above its 200-day moving average for the third time in the last 10
weeks and regained 31 points to close at 1798.
All traders are advised to re-enter the stock market at the 1084-level for the
S.&P. 500 or less, perhaps at today's opening, using an intraday stop 9 points
below the entry level. The S.&P. 500 has been projected to finish at the
1113-level or higher on Friday and at 1115 or more next Friday.
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