主题：10/06/2008 Market View -- 宁子

THE MARKET

MARKET SENTIMENT

Still reeling off some heavy duty negative sentiment readings, more than enough to support a bottom, much less a rebound.

VIX: 52.05; +6.91. Surged to 58.24 on the high before the rebound in the market brought it back on the close. That kept it just below the October 1998 Russian Ruble Crisis level of 60.63 and the other major spike that hit 172.79 in October 1987, the old Black Monday high.

VXN: 55.36; +5.6

VXO: 59.5; +7.74

Put/Call Ratio (CBOE): 1.51; +0.4. Three weeks above 1.0.

Bulls versus Bears:

This is a reading of the number of bullish investment advisors versus bearish advisors. The reason you look at this is that it gives you an idea of how bullish investors are. If they are too bullish then everyone is in the market and it is heading for a top: if everyone wants to be in the market then all the money is in and there is no more new cash to drive it higher. On the other side of the spectrum if there are a lot of bears then there is a lot of cash on the sideline, and as the market rallies it drags that cash in as the bears give in. That cash provides the market the fuel to move higher. If bears are low it is the same as a lot of bulls: everyone is in and the market doesn't have the cash to drive it higher.

Bulls: 33.7%. Big drop from 37.5% and below the 35% threshold considered bullish. Now with the bulls down and the bears up big there is plenty of pessimism here. Down from 40.7% on the high during the rally off the July lows. Heading back toward the 27.8% on the low this round. Hit 30.9% low hit in March. In March the indicator did its job with the dive below 35% and the crossover with the bears. A move into the lower 40's is a decline of significance. A move to 35% is a bullish indicator. This is smashing that. For reference it bottomed in the summer 2006, the last major round of selling ahead of this 2007 top, near 36%, and 35% is considered bullish.

Bears: 47.2%. Surging from 40.9%. Closer toward 50.0%, the high on this move, but a long way off. As the NYSE indices test the lows you would want it higher. Still above the 35% threshold so still a bullish indication. A move over 50 takes it to the highest since 1995. Extreme negative sentiment. 35% is the level that historically indicates too much pessimism. As with the bulls the jump in bears did its job after hitting 44.7% in the third week of March. Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). This is a huge turn, unlike any seen in recent history.

NASDAQ

Stats: -84.43 points (-4.34%) to close at 1862.96

Volume: 3.532B (+38.58%). Strong enough volume on NASDAQ for a reversal.

Up Volume: 373.128M (-276.325M)

Down Volume: 3.117B (+1.247B)

A/D and Hi/Lo: Decliners led 5.47 to 1. Strong but it was -14.50:1 just before the afternoon rebound.

Previous Session: Decliners led 2.53 to 1

New Highs: 8 (+2)

New Lows: 1141 (+680). On the rise once more as the indices dove to new 2008 lows.

NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg

Gapped lower, sold off 171 points, then found support at the 2004 low and snapped back up to the close, reeling in over half the losses. Big numbers internally on breadth and volume to go along with that big reversal. It has the attributes for a reversal, just not a lot of great patterns just yet.

NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg

SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg

SP500/NYSE

Stats: -42.34 points (-3.85%) to close at 1056.89

NYSE Volume: 1.974B (+39.08%). Volume was strong but it was not as strong as the volume seen on the sessions involving the bailout proposal. This is the weakest link Monday.

Up Volume: 173.38M (-261.456M)

Down Volume: 1.801B (+824.443M)

A/D and Hi/Lo: Decliners led 12.12 to 1. Very weak on the close, and right as the reversal began it stood at -45:1. I have never seen breadth that negative.

Previous Session: Decliners led 1.87 to 1

New Highs: 2 (-15)

New Lows: 1663 (+1021). New lows explode again as the indices tumbled to new 2008 lows.

SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg

Undercut the 2004 lows intraday and then reversed to close very near those levels, and that puts it just over a consolidation level from Q4 2003, part of the run off of the March low after the October 2002 bottom. As noted above, if this bailout does the trick the move to this point satisfies many technical and internal bottom indicators. Now it just needs to put together some leadership. If not, well, it heads lower. For now there is enough in place for a significant bounce that we can trade.

SP600 (-3.44%) reached down to some mid-2005 levels and snapped back. It is still well down from the bottom of its 9 month trading range so there is plenty of work to do, but SP600 can bounce here and run up to the bottom of its former trading range at 340 (closed at 320). That is tradable to the upside and then if it fails, then to the downside.

SP600 Chart: http://investmenthouse.com/ihmedia/SP600.JPEG

SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg

DJ30

Similar to SP500, the Dow undercut the 2004 lows and reached toward the important June to August 2003 flat consolidation level, the first rest stop after the 2003 low. Big recovery here as well to close at the bottom of the 2004 base. Closed below the 10K level for what that is worth. Now we see just what is in the tank for a bounce back up after this third leg lower. It will likely rebound toward 10,750 to 11,000 and then come back to form the rest of the base, likely another double bottom attempt.

Stats: -369.88 points (-3.58%) to close at 9955.5

VOLUME: 391M volume versus 299M shares Friday. Solid volume but as with NYSE it was not blowout volume on the reversal.

DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg