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MKT S&P TBill/EarnYld Ratio hits record high



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Attached is updated monthly chart showing the S&P TBill/Earnings Yield Ratio
at the highest level since TBill data became available in 1941. Needless to
say, this suggests that current valuations are at extreme risk. The weekly
version shows the 1.488 high exceeded only by the 1.495 for the week ending
July 17 1998. The weekly NYSE McClellan Oscillator is on a sell signal and
the NASDAQ McOsc is about to join it.

On a price basis, the S&P has been in a bullish 9 week consolidation,
holding to a very tight range after an extremely strong advance. A hint of
what may lie ahead may be found in last week's NR7 (narrowest range of last
7) on weekly chart followed by this week's tail reaching to within a few
points of the range high and a close near the bottom of the week's range.
The bullish view may be considered intact while the S&P remains above the
Jan 15 low of 1210, however any meaningful break of this low is likely to
prove exceptionally viscous with little or no time to get out of the way. A
lower pivot at 1147 is to be found on the weekly for 12/18 along with nearby
Fibonacci support, however this would be unlikely to hold given the extreme
valuations and especially the NASDAQ correcting from a high 30% above its 30
week moving average which suggests a minimum retracement to 20% below its 30
week moving average of 1946.

My 45 minute charts on the S&P not only turned negative mid-week, but the
futures has hit such wide bar ranges that I have it classified as unsuitable
for day trading. Thus investors and traders alike would be wise to exercise
great caution.

Earl


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