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VOLATILITY INDEX is going WRONG direction for the "start" of any kind of important rally leg. (VXO)
MODERN VIX formula shows a close well below 10 and 20 SMA'S!!! And a decade low reading!
You MUST be able to appreciate this next chart. FRIDAY reading is a full 30% ABOVE this relationship, at the 1999-2000 ALL TIME BUBBLE MANIA TOP! So what is this? and consider we are 50% below highs in NAZ around 10% in Dow and 20% in SPX? As some other indexes have hit highs in 2004-2005 (small cap and Trannies).
Great rallies are born of too much pessimism, like after 3 years of Bear Market. Consider market has virtually no net gain in 2005, yet the Bears fall away to insignificant levels. (IIAA survey shows 2 week avg of bears at only 17% with this past week at only 14%.!!!!!)
Also consider we have had record plus 140 WEEKS consecutive plus 50% BULLS readings as well, this includes part of the wicked past Bear Market!!!!! EVEN though, no new high in the Dow! Granted 2003 was VERY kind to mutual fund holders.
ADD to the unusual behaviour is the fact that since the FED began raising the funds rate from 1% to 3.25% the 10 year yield has FALLEN from 4.9% to around 4% (currently 4.17%)
Bonds normally get SOLD during final stages of bull market. See move of 1998 and 2003. WE just closed above 20 EMA, so yields could trend higher up until next jobs report.
Friday Industrial production and Factory ute rates were sceeaming to recovery highs (80% capacity) and normally considered very inflationary. Yet, yields were slightly down yesterday.
McClellan OSC has fallen for 3 straight days during 3 straight days (now 7 up days in row) of PLUS Dow action !!!!! as new highs fall away! New lows have not picked up yet.
EQUITY ONLY Put/Call ratio exudes bullishness.
New highs for SPX(2005) but not for Dow and Trannies! We continue to have a dysfunctional market, one that moves this way is seen as weak.
Gold and Silver have shown COOL action towards the inflation readings of manufacturing data etc, and the CPI and PPI data are so manipulated by the BLS to be worthless. I trust the metal action, yet we KNOW where the asset inflation has come from.
EWT points out in FRI update that the FED FOLLOWS open market conditions, not the other way around! SO keep an eye on 3 Month Treasury Bills, which are STILL rising near SAME rate as Fed Funds, there can be some LAG TIME between (as much as one year) when the FED follows the freely traded fund rates. (as was the case in 2001 and 2004)
10 YEARS are now above a rising 10 and 20 EMA while MACD tries to cross above 0 (a BUY signal using triple screen method) SHOULD rates continue in an uptrend, this also MIGHT put pressure on equities. BOND BEARS would mulitply until the setup for the next JOBS REPORT is due. WHich I am "guessing" will be a DISASTER and cause the uptrend in rates to HALT!
I base this on the NET/BIRTH DATA CHART I have posted on numerous occasions provided by the BLS. I think this is a good guess. AND also coresponds with what is normally a tricky period for market bullishness. going into AUGUST.
Doesn't this make sense considering ALL the EXTREMES I lay out here in bullishness?
ALL that data is MORE indicative of a topping pattern, NOT where we BEGIN a new era of BUll Market, NO.....it is signalling, IMHO the death of the cyclical bull which began some 3 years ago!
That is MY conclusion, it is up to you to come to yours.
Duratek@YHOO.COM Do you find my opinions worth reading? WHO else lays it out like I do? Again, I am not trying to pinpoint an exact date, but lay out my argument for what may lie ahead, VS going with the flow.
STocks COULD trudge higher, for longer than we think possible, but IMHO the ONLY argument for that is the willingness of investors to buy with intent to sell higher.....it certainly isn't VALUATIONS and DIVIDEND YIELDS.
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