4 replies to this topic

[denleo]

Choppy trading Wednesday and Thursday. No strong support (1440 -- 1445 on June S&P futures maybe). Buy every time it trades there. Bias remains positive. Then huge gap up over today's high and February gap on Monday morning all the way to new highs on S&P and other indexes. If there is a chance of a pull back (maybe another 3 - 5 points from here), it should be a great opportunity for shorts to cover and for the bulls to get levered. This market has been very technical and very easy. It will continue to be this way. DO NOT short the market!!!! Denleo

[hiker]

Market Insight for April 3, 2007 THE WAGES OF FEAR By Mark Arbeter, S&P Chief Technical Strategist Bearish sentiment suggests another run to the upside. It's not often we predict a spike higher. That fraternity of market mavens who, among other non-bull's-eyes, have called nine of the last six recessions is just not where we'd care to be. That said, certain technical measures we follow suggest higher prices could be in store later this year. We're talking about the put/call ratio, which tracks options contracts purchased on the Chicago Board of Options Exchange. Puts are, of course, options to sell; calls are options to buy. The ratio is used widely as a gauge of market sentiment. When there are more calls than puts, Mr. Market is bullish. More puts than calls, and Mr. Market is bearish. Recently (see chart) this measure hit an all-time high, suggesting Mr. Market had just taken a room at the Bates Motel — a glut of fear, in other words. Interestingly enough, this occurred during what was by historical standards a relatively modest pullback. This excessive fear is, we suggest, bullish. Then there are odd-lot short sales. Odd lots are, of course, quantities of shares that are less than the standard 100-share block, and they are generally traded by novice investors. Short sales of odd lots indicate novices think the market is on the verge of a painful plunge. This bearishness by beginners is, likewise, bullish. So are higher prices in store? Again, no predictions — but such a move has the potential to be significant. Owing to the swift decline in stock prices in all major U.S. stock indices during late February and early March, there is little chart resistance overhead. By resistance, we simply mean levels on the chart where previous buying took place; markets have the tendency to stall at such levels as buyers who bought at those levels sell. The first band of resistance for the S&P 500, from a 21-day price range, comes in at 1435, right near its recent rally point. Above that, the only real chart resistance is around the February recovery highs of 1450 and 1460. And quick moves to the downside, like the one on February 27, occur with very little demand or buying on the way down. This can be positive once the market turns around, since it is much easier to then move right back up through the range established since February 27. So as we see it, a vacuum gets created in a price range, and the moves within this range can be very quick and unrestrained. While we all know that bull markets trend higher and bear markets trend lower, different phases — or slopes within the longer trend — can develop. (Think of Mount Everest — the track from Base Camp to the Khumbu Icefall is a much milder angle upward than the almost vertical Hillary Step near the summit.) For instance, from March 2003 until March 2004, the slope of the S&P 500 was fairly steep at about 43 degrees. From March 2004 until July 2006, the slope was only about 18 degrees. Since the intermediate-term bottom last summer, the slope of the bull market has steepened, rising at an angle of about 34 degrees. A linear regression of the advance since last summer is actually steeper, coming in at 40 degrees. We point this out because the new slope that may be developing is young, so it is somewhat tough to measure perfectly. The implications of a steeper intermediate-term slope are clear: big gains to the upside and potentially a mini-blowoff. We found a couple of cases in recent history that look somewhat similar to recent market action. They both occurred in the year after the four-year cycle low, which we are in now. These blowoffs also happened after a strong, low-volatility advance, such as the one from August until February. In addition, they occurred right after a mini-shakeout. The first instance was in 1995-1996, when the S&P 500 exploded up 10.5% in 23 trading days. The second example was in late 2003/early 2004 when the "500" surged 12% in 55 trading days. A major blowoff took place in 1987. This time period, as well as the chart pattern from back then, matches up well with recent market activity. In 1986, there was a four-year cycle low in which we did not have a bear market, just like 2006. The bull market was in its fifth year, after the August 1982 bear market low. We are currently in the fifth year of a bull market. In early 1987, the S&P 500 rallied 24.5% in less than three months. This is certainly a larger gain than the present advance we've had from the summer 2006 lows, and much faster. The index then went through a fairly quick shakeout, falling 7.5% in six trading days. This is somewhat similar to what we just went through. The market then put in a double bottom, broke out, and then retested the lows. Sound at least a little familiar? The "500" then had an upside explosion, running 21% in 67 days right into the 1987 top. Again, we note the scenario sketched out above is just that — a possible scenario based on technical observations in the past. But it's one that bears watching.

[n83]

has the high p/c actually resulted in increased open interest on puts? no one talks of this/gives info on this

[Randy]

"has the high p/c actually resulted in increased open interest on puts? - no one talks of this/gives info on this"

SentimentTrader.com computes a OEX P/C Determination index using OEX option open interest and volume information. It has been an exceptional indicator recently forcasting both highs and lows. This indicator currently remains bullish.

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[SemiBizz]

I don't expect choppy Wed and Thursday. I expect higher prices right though the end of the week and then a big down day on Monday... I'd be careful long, the price is up against strong resistance that will be broken on light volume. By Monday morning prices could gap down hard. My forecast for today was for a bullish spring and an Large Range Outside Day, We started a retracement off the bearish upthrust today, but it's holiday time, so those bearish upthrusts tend to extend. I'm looking for 2470 to be tested short term...

Edited by SemiBizz, 03 April 2007 - 09:22 PM.