Thread: Market Talk / October 22nd - 28th

Sunday, October 22, 2006

Option Players Cash Their Bullish Bets
Option expiration Friday saw the bulls cashing in their winning bets as four times as much money changed hands in call options as in put options. That level of overly-bullish sentiment has in the past occured not at the end of a bull market, but closer to the beginning of one.

Of course, the market is extremely overbought and could be entering a larger correction than the sideways move we saw last week. But, such a correction is likely to be yet another buying opportunity in a long-lasting bull market.

Other bullish evidence comes from the ISEE, an options exchange which measures sentiment in a way superior to the other exchanges (our explanation of the figures is below the chart). As you see from the chart below, investors were more bearish at the August 2006 lows than at any time this decade. That includes March 2003 at which time the S&P 500 Index was below the 800 level (it closed Friday at 1368.60, up 73½% in the last 3½ years). That's an incredible statistic, since it indicates that after such a huge run to the upside, the crowd is more bearish than they were at the beginning of the last big run to the upside. It also indicates that this market has much more potential to rise once the steadfast bears decide to turn bullish.

http://marketclues.blogspot.com/


The Bull/Bear battle starts again Monday.

I just don't get it.

Stocks all opened down, but now are powering their way in postive territory. "S" is now up 0.55%, "C" is up 0.44%, and even the "I" fund is nearl back to green after opening 0.72% down at the open.

Are the markets really this strong?

Yes, the markets are this strong.

Where is Birchie??

Originally Posted by erichschuette

Yes, the markets are this strong.

Where is Birchie??

Out sacrificing chickens. That's the only explanation for the C fund's run (and more power to him).

Finally, the morning session is moving up fast. Now we'll see if that afternoon theory proves itself by seeing if the market drops this afternoon.

This is what I am seeing-

Looks like the "C" fund is stronger than the "S" fund. And's it's been that way several times the last week or so. And that is an indicator to me of a "maturing" run up.

Earlier in the cycle, the "S" fund was leading for a while, and that told me we had a long way up yet to go.

But now the "C" fund seems to be the stronger of the two, and therefore I think we are in a more mature state of the runup. I'm still fully invested, split between the three stock funds, but am ready to swtich out any time now that weakness moves in.

Does anyone else have a theroy on the "C" vs. "S" relationship here?

S & I flat.
C has had its gains cut in half.

2:22pm ET

The Kingdom of TSP
Daily Edition
October 23, 2006 Closing

Yak, Doodles & Tea Leaves

Kingdom Yak:
Pro-Yak....................................Market advances on reported good gains.

Con-Yak...................................We keep riding the overbought crest.

Jester-Yak................................Indicators are running tight!

Doodles:
Socks [$SPX] Closed at..............1377.02, up +8.42
Stops......................................Alert: 1364. Trail: 1351
Trend (MACD-Hist)....................increasing at +0.140.
Overbought/sold (S-STO)...........[80] 92.31 [20] increasing.

Lube (NYM) Closed at.................58.81, dn -0.52
Oil Markers...............................<70= ok, 70-75= worry, >75= panic.

Tea Leaves:
Yakndoodles.............................Yellow.

The MB is really quite, so that means something is about to "pop" ...........or is that "poop".



(snicker) Another quality post.

Originally Posted by James48843

Does anyone else have a theroy on the "C" vs. "S" relationship here?

Small caps (S) lead out in the first part of a bull market. This one was unusual since the small caps led for such a long period of time - they outperformed the large caps for 3 years plus. This is probably tied to the fact that the interest rates were cut to incredibly low levels (1% Fed funds rate, mortgage 30 year rates dropped below 6%, etc.).

The switch to C fund / large caps happens later in bull markets, likely due to the fact that bull markets parallel the economy - mature bull = mature expansion, which means interest rates are likely to be rising. Since small companies depend heavily on loans to finance their operations, rising interest rates wreak havoc on their profit margins and make things difficult for them. Larger companies often have cash reserves to tap into when they wish to ramp up production, so they aren't as adversely impacted by the higher rates.

There might be more to it than this, but I think basically this is what is happening.

more AM selling but on lower volume... could be a contiuation of the same bullish pattern. Always tough to pull the trigger and allocate more to equities when you think a short term pull back is near, especially in the face of a fed meeting. I guess I just have to ask myself, do I think the S&P will reach >1380 before it tests a support level, and is it worth staying in?! In 1986, during Reagan's 2nd term, the S&P ran up in October through the election, sold off in mid November, spiked up the 2nd half of Nov, and then sold off through all of December. Different times but a couple similar conditions though... what to do, what to do?!