Tom,
Here's what Bernie S. had to say in this month's Trader's Notes:
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The strong technical outlook for blue-chip stocks that we mentioned
last month has continued almost unabated through July, pushing past our targeted level of Dow 8000 and surviving the Humphrey-Hawkings testimony of Alan Greenspan. As the accompanying graph shows, the S&P 500 Index (SPX) has continued to hold above its 20-day moving average on a closing basis throughout July. The fact that this index has managed to trend higher along such a short-term moving average clearly indicates that a strong technical uptrend is in place. In addition to Dow 8000, the psychologically important 900 "century mark" has been taken out on both the SPX and S&P 100 Index (OEX) this month.
The sentiment perspective, however, has continued to show increasing optimism, which causes us to be concerned about the market's outlook
through the end of the summer. The high Consensus readings that we
mentioned last month have continued -- the 5-week weighted moving average of bullishness in the Consensus survey stands at 75.5%, which is the highest reading of the 1990s. The next-highest reading this decade came on November 29, 1996, and preceded a 5% drop in the OEX over the next 3 weeks.
Surveys are not the only outlets showing increased bullish sentiment,
as option speculators are trading a relatively high number of calls
versus puts. The 10-day moving average of the CBOE equity put/call ratio registered a slightly bearish reading of .355 last Thursday, and the more significant (according to our analysis) 21-day moving average is also approaching a bearish level. More significant, perhaps, is that these readings are not consistent with market-bottoming modes.
Another continuance from last month's Trader's Notes is the
outperformance of stocks vis-…-vis bonds. We switched our posture on
bonds to "bullish" on July 7th, in time for a recent 2% rally in the
September bond futures (US/U7) -- however, we would still look to
individual stocks for the largest potential gains and the best
risk/reward ratio.
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Taqi |
