主题：10/01/2008 Market View -- 宁子

THE MARKET

MARKET SENTIMENT

VIX: 39.81; +0.42. Hit 42.38 on the high, its third straight day topping 40 on the high with that 48.40 peak on Monday.

VXN: 42.92; +0.34

VXO: 45.27; +0.76

Put/Call Ratio (CBOE): 0.99; -0.31

Bulls versus Bears:

For the second time this year bears are crossing above bulls, doing so basically where they did in March on their way to much more extreme readings just about the time the market made the March low and started the last rally. Positive for the market and if SP500 is going to hold the long term trendline is the place to do it.

This is a reading of the number of bullish investment advisors versus bearish advisors. The reason you look at this is that it gives you an idea of how bullish investors are. If they are too bullish then everyone is in the market and it is heading for a top: if everyone wants to be in the market then all the money is in and there is no more new cash to drive it higher. On the other side of the spectrum if there are a lot of bears then there is a lot of cash on the sideline, and as the market rallies it drags that cash in as the bears give in. That cash provides the market the fuel to move higher. If bears are low it is the same as a lot of bulls: everyone is in and the market doesn't have the cash to drive it higher.

Bulls: 37.5%. Not much of a drop from 37.9% last week. Down, but just edging lower, indicating most don't understand the gravity of the credit situation. A dive under 35% would be a positive given the inverse nature of sentiment indicators. Down from 40.7% on the high during the rally off the July lows. Turned back up before it got down to 35%, below which is considered bullish for the market as the number of upbeat investors is relatively low. A long way up from the 27.8% on the low this round. Hit 31.9% two months back and the 30.9% low hit in March. Steep drop from a rebound high at close to 50% on the run through May. In March the indicator did its job with the dive below 35% and the crossover with the bears. Now it is going above and beyond. Bulls and bears have crossed over again, doing so even before the prior lows are hit. The bulls and bears were eye to eye in mid-February and have crossed. A move into the lower 40's is a decline of significance. A move to 35% is a bullish indicator. This is smashing that. For reference it bottomed in the summer 2006, the last major round of selling ahead of this 2007 top, near 36%, and 35% is considered bullish.

Bears: 40.9%. Bears fell from 43.7%, apparently on the belief a bailout will immediately cure the market's woes. It won't but these guys will apparently need to be convinced. Unfortunately, they will likely get that education over the next several months. If the bulls turn over and crap out below 35% again that would be a strong signal. Interestingly they are still 'crossed over,' i.e. more bears than bulls. Moving toward 50.0%, the high on this move, but a long way off. As the NYSE indices test the lows you would want it higher. Still above the 35% threshold so still a bullish indication. A steady rise to 50% on this move: 48.9%, 47.3%, 44.7% and 39.3% before that. Well above the bullish level and the highest since 1995. Again, that is one of the best indications that sentiment is getting extreme on the negative side. It is again past 35%, the level that historically indicates too much pessimism. As with the bulls the jump in bears did its job after hitting 44.7% in the third week of March that was up from an already freakishly strong 43.3% the week before. Up sharply from a low of 19.6% on the last rally. Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). This is a huge turn, unlike any seen in recent history.

NASDAQ

Stats: -22.48 points (-1.07%) to close at 2069.4

Volume: 1.931B (-10.05%)

Up Volume: 486.606M (-1.52B)

Down Volume: 1.435B (+1.067B)

A/D and Hi/Lo: Decliners led 1.71 to 1

Previous Session: Advancers led 1.9 to 1

New Highs: 7 (-8)

New Lows: 155 (-104)

NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg

NASDAQ is not the leader, at least to the upside. Its pattern is not like the NYSE large caps as it broke down from a head and shoulders and has yet to make it even back up to the neckline on the rebound. It is not dealing from a position of strength and indeed with many large cap techs in swan dives they are not ready to lead back up. NASDAQ is at the 2004 highs having fallen through the 2006 and 2005 highs. It might not be in position to immediately recover, but it is in position to start to put together a bottom. It has a ways to go in doing that, but it can work on it while DJ30 tries to lead.

Haven't mentioned SOX (-1.19%) in quite awhile. Why? Because it has shown no inkling of leadership either way. It is a whipped dog, tagging along on all of NASDAQ's moves.

NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg

SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg

SP500/NYSE

Stats: -3.68 points (-0.32%) to close at 1161.06

NYSE Volume: 1.369B (-14.43%). Average volume, leading the NASDAQ and its low volume.

Up Volume: 698.382M (-712.817M)

Down Volume: 665.492M (+497.709M)

A/D and Hi/Lo: Decliners led 1.02 to 1

Previous Session: Advancers led 3.96 to 1

New Highs: 17 (+9)

New Lows: 237 (-107)

SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg

Held steady right at the mid-September low, holding the Tuesday rebound, taking a breather, on lower, average volume. Its test is a bit deep to hold and result in a double bottom, but if the Dow is ready to lead and some financials looking solid, SP500 will follow along. As noted above it is at the 2004 levels, a point it could find support, particularly if DJ30 does. Still that ugly multiyear double top that would be the classic pattern for that meltdown discussed in the market summary above, but we won't go there right now.

SP600 (-0.53%) again held above the January, March, and July lows, bouncing Tuesday and hanging onto the gains for the session. It is still in a trading range, not making new lows on the selling. That is an overall positive for the market and economic outlook, but it is a long way from a new breakout.

SP600 Chart: http://investmenthouse.com/ihmedia/SP600.JPEG

SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg

DJ30

A lot of print tonight analyzing the DJ30 pattern. The flat session on lower volume shows it is still in position to make a double bottom and then make a new breakout off of the 2004/2005 peaks.

Stats: -19.59 points (-0.18%) to close at 10831.07

VOLUME: 108M shares Wednesday versus 319M shares Tuesday. Good low volume pause after the recovery, but it still has to play out, meaning it has to make its move after this pause, i.e. a follow through or roll back over.

DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg