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It is said that the public is going to get taken and yet I just read that there
has been a net liquidation from mutual funds for the past 4 weeks. The sums
aren't great, but at 3.3 billion a week pretty soon you are talking real money.
I have overbought conditions in some areas but I still don't have a sell signal
in my system. Could there be a rally into New Years and then a reversal of the
January effect? Did the January effect occur in November and December?
Everyone wanting to beat the shopping rush and now that everyone has what they
want, who is left to buy? Your ever love'n fund managers, if they have cash.
Ira.
Earl Adamy wrote:
> I post one of these periodically when something worthy of note occurs. We
> just surpassed the July high in the S&P Earnings/TBill ratio. We have
> reached this lofty level only 3 times previously in the past 40 years
> (actually since my S&P earnings history begins in early 30's) and in each
> case a significant correction has followed. The alternatives would be
> another huge cut in interest rates (unlikely) or huge gains in S&P earnings
> for the quarter (also unlikely). Also of note is the ratio decline following
> each time the ratio has crossed the "Extreme Danger" level - the latest
> decline is the only time that the ratio did not fall to the "Opportunity" or
> "Extreme Opportunity" levels. Does all of this guarantee a sell-off? No, but
> the odds are extremely high. Does it mean we should be shorting stocks? Not
> until we see some downward momentum. Does it mean that Buy and Hold is
> extremely risky? You bet!
>
> Other tidbits from my weekly chart review:
>
> 1) My 10 week moving average of special short sales ratio indicates that the
> NYSE specialists have continued to liquidate inventory into this rally and
> are averaging short positions at the highest levels in a decade. Specialist
> short sales reports are delayed two weeks.
>
> 2) The transports have been unable to confirm the new highs in the
> industrials in spite of the lowest real fuel prices in nearly 50 years
>
> 3) The Amex Broker/Dealer has lagged the S&P 500, however it has recently
> sprung back to life which could be bullish.
>
> 4) The small caps still have not sprung to life to expand breadth as
> evidenced by daily and weekly a/d numbers as well as the Value Line Geo. The
> Ru2000 futures shows a very interesting "W" price pattern with a double top
> in the top middle of the W and appears poised to breakout to upside - either
> way, this bears watching as this has been a seasonally strong time for small
> caps.
>
> 5) Bonds should get a bounce in here, however bonds appear poised to (at a
> minimum) retest the November low of 124^23. More likely are declines to fib
> price objectives of 120^25 or 114^16.
>
> 6) Recent chart patterns in bonds seem to be tracking the US$. The dollar
> appears to have put in a failure and top, however this won't be confirmed
> without a break below 9106 and a rally above 9681 would call the failure
> into question.
>
> Earl
>
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