主题：11/06/2009 Market View -- 宁子

Bulls versus Bears:

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: 30.2. Up from the 5 year low of 21.3% hit last week. Nothing like a rally off the prior lows to build up the confidence. Still below the 35% considered bullish for the market. It was at this level in early October just as the market started to dive lower. This move down showed us the largest single week drop we have ever seen, falling from 33.7% to 25.3%. Hit 40.7% on the high during the rally off the July 2008 lows. 30.9% was the March low. In March the indicator did its job with the dive below 35% and the crossover with the bears. 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: 48.3%. Down significantly from the 52.7% last week that was off the prior week's 5 year high at 54.4%. Well above the 35% threshold so still a bullish indication. This move over 50 takes it to the highest since 1995. Extreme negative sentiment. 35% is the level that historically indicates excessive pessimism. As with the bulls the jump in bears did its job after hitting 44.7% in the third week of March. 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: -72.94 points (-4.34%) to close at 1608.7

Volume: 2.414B (+10.58%). Still below average but modestly so as the selling picked up speed. The sellers stepped in on Thursday after sitting out Wednesday. Saw the opening and they are taking it.

Up Volume: 229.649M (+13.756M)

Down Volume: 2.171B (+207.766M)

A/D and Hi/Lo: Decliners led 3.56 to 1. Solid for second straight session.

Previous Session: Decliners led 3.57 to 1

New Highs: 5 (-1)

New Lows: 182 (+99). Watching this closely as the index heads toward the prior low though still well above that level. You want to see the new lows stay significantly below the lows hit on the prior low. Interestingly they were fewer as NASDAQ hit a new 2008 low two weeks back. That is a positive, and if it does it again, great. Want to see it less than 800ish.

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

Bad to worse, gapping lower and selling to close at session lows. 9.9% in two days, closing below the first two October closing lows. That leaves NASDAQ looking at a test of that low, 100 points off that level on the Thursday close (1506 is the 2008 closing low). Now NASDAQ can still hold here and set up a 4 week reverse head and shoulders pattern, an upside pattern. We just have to see how this decline plays out.

NASDAQ 100 (-4.46%) gapped lower as well, forming basically the same pattern as NASDAQ. Some support at 1200 where it bottomed intraday on the first two matching lows in October. So we look at 1200 (closed at 1241.97) as a level to try to bounce the large cap techs.

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

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

SP500/NYSE

Stats: -47.89 points (-5.03%) to close at 904.88

NYSE Volume: 1.526B (+16.58%). Volume bounced toward average here as well but didn't get their either. Stronger selling volume shows the balance of course in the seller's favor but it is not blowout. Again, better chance of holding prior lows if volume remains low.

Up Volume: 72.807M (-2.579M)

Down Volume: 1.452B (+223.67M)

A/D and Hi/Lo: Decliners led 4.84 to 1

Previous Session: Decliners led 4.01 to 1

New Highs: 8 (+5)

New Lows: 175 (+108). Watching this as well on the test. Spiked well over a thousand on the early October selling.

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

Sold hard, falling to some support at 900, even undercutting that level briefly. Managed to hold it on the low, roughly matching the early October closing low. If it holds here it is makes the right shoulder to a 4 week reverse head and shoulders pattern, and that pattern often forms at the bottom of a cup. Is this a cup? Could be. This current pattern has to yield a breakout to start answering that question.

SP600 (-3.47%) sold off hard as well though it showed relative strength (-3.47%) compared to the other indices. If it holds here it also forms the right shoulder to a reverse head and shoulders. The small caps posted the strongest run off of the last lows. The small caps are economically sensitive and they tend to bottom first after a bear market when an economic recovery is anticipated. Well, maybe. They bottomed with the rest of the market in late 2002 and early 2003. They just moved up really sharply when they took off, and a lot more of them moved with more strength than the rest of the market. Thus this last move off of the lows was very interesting given their relative moves vis- -vis the large caps. That does give us a clue that the market is somewhat factoring in a recovery, and if the indices bottom here of course that would make sense. Money would start moving into the smaller caps because they provide the largest gains in the initial stages of an economic recovery just as with the last recovery. Moreover, the market is moving toward the time of year that, during an uptrending market, small caps perform better, i.e. after the first of the year. Thus while the small caps will bottom with the market, their relative strength in doing so is key, and the strength shown in the last bounce is another reason to watch for a bottom here at the October lows of some sort.

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

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

DJ30

The blue chips lopped off 9.9% Wednesday and Thursday with volume jumping above average Thursday. The large caps in the Dow were hit hard. Its financials, its energy stocks, and its tech stocks were hammered while the smaller cap versions were less molested. Looks like a test of the initial closing low on the year (8451) is going to be tested; as with the other indices, if it holds you have the same kind of reverse head and shoulders pattern that often forms at the bottom of a cup base. Hell of a deep cup. It is testing and 8451 is the first shelf, then 8175 as the closing low for 2008, then the intraday low at 7882.

Stats: -443.48 points (-4.85%) to close at 8695.79

VOLUME: 344M shares Thursday versus 264M shares Wednesday. Large caps getting the hardest hit.

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