Date: Fri Oct 24 2003 11:49
trotsky (Apollo@MSFT) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
MSFT is one of the few tech stocks with negative ( i.e. bearish ) put/call OI, and has ceased to be a leader long ago. it hasn't gone anywhere in this recent tech rally compared to most other tech stocks. btw., the broader market is far stronger today than the averages make it look - it seems therefore highly unlikely that a big downturn is imminent. as for the gold stocks - stock market relationship, you're still wrong on that. true, the HUI tends to top with a lag of a few weeks, but otherwise it correlates almost perfectly with the market at large in intermediate term time frames. so if the stock market HAS indeed topped, it would be time to begin looking for the exit in the course of the next two or three weeks. one of the reasons is that a confirmed stock market top would without a doubt ignite a big rally in bonds, which in turn would remove one of the most important props for gold stocks, the steepness of the yield curve. bond spreads are in fact the one area where the stock market bears can look for credible ammunition for their case: over the past two weeks there was a blow-off move in spread product, with junk yield spreads at their lowest levels since early '02 and emerging market spreads shrinking to or even below pre-'98 crisis levels. and since the high in junk spreads in July '02 marked an important stock market bottom, it could be argued that the recent low may mark a top.
the bears really only have one problem: there's too many of them, and they have too much money riding on their views. open short and put positions, especially in tech, are gigantic, in many cases at record highs. Rydex bear assets are still HIGHER than at both the July and October '02 stock market LOWS. in fact, they're 63% higher than at the July '02 low, which is pretty significant. of course some of that is 'smart money', but the smart money has been short for months now. see for instance the most recent 'fearless forecasters' poll, a smart money sentiment poll measure: 65% bearish, and 4% ( ! ) bullish, which i believe is an all time low in the FF bullish percentage. although the market can and will do whatever it likes, crashes that everybody and his auntie expects and is positioned for normally tend not to happen.
lastly, i still think all those bears will be proven right - in the long term. AFTER they have capitulated and are repositioned for more UP. |
