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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (24441)	11/25/1999 1:40:00 PM
From: d. alexander	Respond to of 69788

Harry; thanks for the Favors weekly. In case you don't have access to this part of Optionsource (skip if you do) Monday Morning Alert - 11/22/99 How bullish should we be at this point? According to some naysayers, market breadth and other indicators say that we shouldn't be bullish at all. However, according to some quantifiable market sentiment, the answer is “very bullish”. The November expiration cycle just set a new record. Over the last 10 years, the S&P 100 Index (OEX – 749.30) has gained a maximum of 11 percent from the beginning of any expiration to its end (achieved in November 1998). Last month's expiration return shattered this record, reaching a level of 14.97 percent. The next highest return for an expiration cycle is around nine percent, reached during the February 1998 and May 1997 cycles. What is unique about these expiration cycles, aside from the fact that they posted impressive returns, is that they all occurred in the month following a major market bottom. Bullish signals are continuing to come from our CBOE equity put/call ratio research. This trusted sentiment indicator first started signaling bullish market conditions on October 28. Since then the OEX has returned over 9.5 percent. This ratio's effectiveness relies the heavy volume of equity options traded on the CBOE. Last week, the CBOE established a daily call volume record, as 1,239,330 call contracts were traded. This continued growth in popularity of equity options will enhance this indicators effectiveness in providing true market sentiment. Last week's CBOE equity volume activity has led the ratio to a lower reading of 0.35, but this in no way is a sign of overwhelming optimism that would cause us to treat the market with caution. What should be observed about this ratio is that it just spent a record amount of time above the pessimistic level of 0.50. Therefore, the sentiment that had to build up to keep the ratio above the .50 level for so long will take a long period of time to unwind. There is no pre-determined time within which this ratio will unwind, but previous occasions in the 1990s have shown that these rallies normally last between two and six months. Should this pattern hold, the current market should stay strong into mid-January. Another sentiment indicator that we have been watching closely for signs of unwinding is the Rydex Long/Short Ratio. This ratio compares the total assets in the bullish Nova and OTC funds to the assets in the bearish Ursa and Arktos funds in order to gauge bullish or bearish sentiment. This ratio has increased from 0.36 to its current level of 0.74, indicating that the investor outlook for the market is becoming more optimistic. While the valuable negative sentiment gauged by this indicator is being depleting, the long/short ratio, much like the equity put/call ratio, still has a large amount of unwinding to do before it stops signaling bullish conditions. As a comparison, the current level for this ratio matches the level seen on October 30 last year. Following that reading, the OEX went on to return more than 12 percent. Additional proof that pessimistic sentiment remains lies within the newest short interest figures for Standard and Poor's Depositary Shares (SPY – 142.5) and Nasdaq 100 shares (QQQ – 151.56). Even with the market's recent rally, SPY and QQQ short interest remains high with 22,729,736 and 22,056,574 shares short, respectively. This represents a slight decrease from the previous month for SPY short interest and an increase for QQQ short interest. As you've probably heard, people who live in NYC tend not to visit Lady Liberty or the top of the WTC, etc. List, in my case includes parades <VBG> The Christmas season has its grace notes. Wonderful music and the trees everywhere strung with lights. I kind of like the city when it's tired and hot on a summer night. People sitting on stoops (or whatever if the stoops have been demolished). People wearing the most gadzooks godawful incredible things + skates, of course. Accompanied by dogs. It might be interesting to go look at the stock exchange on the pseudo-Millenial midnight (strictly Anno Domini); probably not a soul in sight. However I do live a few blocks from Times Square! Dorothy