MARKET INDEX TECHNICAL ANALYSIS - MITA Message Board

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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA

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To: High Country Trader who wrote (10872)	3/3/2002 1:29:31 AM
From: J.T.	Read Replies (2) of 19219

One sentiment indicator that is near historical extremes is the shorting activity of the public vs. the NYSE members. This indicator is very, very bullish ****************** A very significant time period we have discussed in the past that is eerily similar and reminiscent of today is... you guessed it... the november 1986 boesky low. Why? In Nov 1986, the NYSE Short Interest Ratio was higher than at any time in history. The number of shares that bears sold short was equal to nearly three days average trading volume. Like today, they hoped to buy those shares back at still lower prices. But a classic short squeeze commenced and short sellers had to cover at escalating prices. Further, the Public Shorts/Specialists Short Ratio showed a 10 week moving average going into the boesky low at 63%, indicating that short selling by public speculators was equal to nearly two-thirds the level of shorting by sophisticated specialists on the Exchange floor. And because the public short sellers are usually wrong and the specialists usually right, the high PS/SS Ratio was an indication the market was ready to launch higher. And it launched higher all the way to August 1987. This was confirmed in 1986, just as it is today, by the adjusted nyse weekly advance/decline line reaching its all time high the same week into the boesky low. And what was the 'noise' in 1986? Besides the boesky insider depredation, we had sluggish economic growth, iran-gate arms for the Ayatollah, and 10 - 30 million cash for the contras with ollie north taking the heat on the stand. One difference is there were more than a few investment gurus who turned Bullish right after the boesky affair. Today, nine of ten timers digest investment advisors are bearish which could lend credence to primary epicenter wave 3 dead ahead which is bolstered by record short interest that could add fuel to any melt-up fire. Food for thought in the current market environment. Best Regards, J.T.

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