OEX Trading Resources
 ... Earlier Market Comments & Updates

04/21 Weekend Update
After reaching the key (61.8%) Fibonacci retracement area a week ago, a snap-back move brought prices up for a test of the earlier broken wedge line, which is still intact as of Friday's close. A toppy Cycle10 indicates short term weakness from this resistance zone, a view which is also supported by Friday's Doji candlestick formed up against it. Dojis are often found at turning points in the market. In addition, current BPI sentiment readings, reflects an overbought market condition.

From a Dynamic Gann Level point of view, Friday was the fourth day in a row the OEX failed to overcome the L2 DGL (50% Fib. & DGL level), with RSI 25 at the same time showing a bearish divergence. This divergence is a fact for both the long term and short term windows ( Since Nov. 2005 & March 2006, respectively). This is a strong technical warning about tops forming in both these time frames.

Another technical point to consider, is that OEX Weekly prices once again have reached strong weekly trendline resistance, where either a breakout or a reversal must be the outcome. Weekly Cycle10 is still holding on to it's downside pressure phase, in spite of the recent advance in prices. Although less likely, a consolidation up against this zone is another possibility.

QQQQ Daily should start the new trading week with a test of trendline support, which also represents the 50% retracement area (41.7). Any clear daily close below this support area, could open up for more weakness towards the March low.

Yields have climbed above the 5% level for the first time in several years, which may have been a contributing factor to the breakout in Gold prices. Investors often looks to gold as a more safe investment, as higher yields tend to put pressure on the stock market.

04/07 Weekend Update
The OEX clearly broke out from the Rising Wedge pattern Friday and closed near the first Fib. support level and the L1 DGL. Once again, RSI 25 gave a warning in March when it climbed above 60 and at the same time formed a second lower peak divergence since Nov. 2005, while the OEX reached a new high, reflecting underlying weakness. The OEX March pivot low is now violated.

Cycle10 just barely entered it's sell zone, before Friday's sell-off caused a reversal in this indicator. As there is plenty of room to the downside before the market is considered short term oversold, the OEX may reach the key (61.8%) Fib. level, (579 area) before reversing.

The QQQQ high touched trendline resistance Friday, before a sell-off was ignited. The early downside pressure phase in Cycle10, makes a test of trendline support in the 41.7 area probable, before looking for a short term reversal.

03/31 Weekend Update
A broad market update is available through a fresh issue of the Stock Market Newsletter Trader's Tips, read it online here

03/24 Weekend Update
The OEX is struggling with trendline resistance it met a week ago and is vulnerable to fall back for support, as long as prices stays below this trendline. And the fact that Cycle10 is in the early stages of a downside pressure phase. The cross point of two trendlines (the earlier broken trendline and a trendline drawn through the recent near term lows) gives strong support at around 588.

The overall positive trend from the February low has brought Weekly Cycle10 to levels where it would normally make a bearish reversal, so the Weekly Trendline at 605 could be a possible target, before a top could be in place. However, if overcome (closing basis) it would open up for even higher prices. Any Cycle10 reversal with the OEX still up against this trendline, would increase the odds of a top in place. Especially if the weekly bar low which caused the Cycle10 reversal is broken.

If the overall advance from Feb. continues into the upcoming 03/31 Gann Angle (+/- 1 day), this cycle convergence could be powerful enough to cause a trend reversal of minimum short term degree.

Another technical point to consider, is the current position of 25 RSI. Often, when a 25 period RSI climbs above 60, singificant tops tend to form in the OEX. However, given the projection for a possible mid & long term top in May, (as outlined in the Market Outlook 2006 Report) it may come as a modest pullback only, before heading north again.

03/17 Weekend Update
The OEX broke through the trendline mentioned in the previous update but has now reached another trendline, drawn through two important highs since Nov. 2005. This should be quite stiff resistance and given the toppy Cycle10, a pullback from this trendline is likely. The trendline just overcome, should then act as support instead, down at around 588.

The OEX closed above important weekly trendline resistance. But another one, drawn through the 2004 & 2005 highs, comes in at around 600. This is another high probabilty, intra-week target, before a top of minimum short term degree could be in place. The advance is not backed up by the MACD, still showing a strong bearish divergence vs. the new peak in prices. However, NH - NL Index readings have improved.

The overall bullish trend from February, looks like a wave 5 pattern, as part of a five wave impulse structure from the Oct. 2005 low. It is the current preferred wave count at this point. According to the Elliott Wave Principle, when five wave impulse structures ends, a three wave corrective pattern is to be expected, typically reaching the 50% or 61.8% Fibonacci retracement area, of the previous advance.

The QQQQ recovered, after finding trendline and 50% retracement support, a week earlier. It now has a trendline resistance challenge to overcome (closing basis) early next week. A Cycle10 entering it's sell zone, makes a pullback from this zone a likely scenario, although it may go for a test of the Triangle high first.

The critical weekly Nasdaq Comp support i wrote about last week, apparently was strong enough to force a reversal in this market. A clear entry into the Wedge pattern again, has yet to be seen though. The next trading week should give more clues.

The XAU (Gold & Silver Index) also found support on an important trendline and gained ground this week. The short term outlook is positive.

03/10 Weekend Update
The OEX ended the week in positive territory, after going through some weakness in the first few days of the trading week. With Cycle10 just started on a new upside pressure phase, a test of trendline resistance at around 588, would be a high probability scenario, early next week. If overcome, (closing basis) it could open up for even higher prices.

QQQQ Daily broke out from a complex triangle and tested 50% retracement support, intra-day Friday, but managed to close at a trendline drawn through important short term lows since the beginning of the year. Given the close in the upper part of the range and with Cycle10 bottoming out, a reaction up from this support is not ruled out. Any break of Friday's low, would instead signal more weakness coming.

The TYX (Yields) made a close above important weekly trendline resistance, so a test of the 50% retracement area (4.9) is the next likely event.

Nasdaq Comp weekly prices broke out from the Rising Wedge pattern but found support on the trendline drawn through larger market peaks. Any clear weekly close below it, would open up for more weakness in the tech market. Higher yields would put pressure on the stock market in general, so this critical support may give in to the bearish forces.

The XAU (Gold & Silver Index) also closed at critical weekly trendline support. Given the bottoming out Cycle10, an advance starting from this area, is probable.

03/03 & 02/28 Week & Month Update
A broad market update is available through a fresh issue of the Stock Market Newsletter Trader's Tips, read it online here

02/24 Weekend Update
The OEX pulled back, after testing weekly trendline resistance intra-week. On the daily chart, Cycle10 is in the early stages of a downside pressure phase, so if daily trendline support fails to hold, it could open up for more weakness, short term.

02/17 Weekend Update
The OEX broke through trendline resistance and ended the week right below the January high. Friday's Inside Day is a good opportunity to get clues about where this market is heading next. A break of Thursday's high would indicate a test of the Jan. high is coming, while a violation of the low could mean a near term top is forming, right below this high. Anyway, the toppy Cycle10 suggests the OEX is about to make a top, at one of these levels.

From an OEX Weekly point of view, important trendline resistance seems to be a natural target, before a short term top could be in place. If clearly overcome on a weekly closing basis, it could be a quite bullish signal for the OEX, mid term.

However, near term bearish divergences in indicators like the New High - New Low Index and TRIN suggests the weekly trendline will stay intact.

To come up with a time target for a short term top, the OEX has just entered the O2/16 Gann Angle +/- 1 day time window. With the trend being clearly bullish into this GA, a bearish reversal is looked for. An impact from this cycle convergence is still a probability.

Another technical point, in favor of the short term bears, is the set up on the QQQQ Daily chart. Prices have made a snap-back move towards it's earlier broken trendline.

Given the toppy Cycle10 and bearish divergences in key indicators, an entry into this huge wedge pattern again, would be a surprising event. Instead, odds are good this stiff resistance will remain intact and a short term top will form up against it.

02/10 Weekend Update
Mid week, the OEX violated the Nov. - Dec. 2005 lows and nearly reached the 50% retracement area, before recovering and ending the week up against trendline resistance. Given the Cycle10 upside pressure phase, if this resistance is overcome next week, it would most likely confirm a completed a-b-c zig-zag correction from the Jan. high.

A reversal here would instead indicate a test of trendline support in the 568 area. Any daily close below both the trendline and 50% retracement area, would mean a test of the key Fibonacci retracement area is coming next.

Speaking of Fibonacci, in technical analysis the proportion of Fibonacci has three basic percentages as its foundation:

1. 38.2%
2. 50%
3. 61.8%

By using this new proprietary ProfinacciTM Calculator, you'll be able to plug in the highs and lows, and effortlessly calculate the Fibonacci Retracements for the OEX and other markets.

On the QQQQ Daily chart, prices touched 50% retracement support, before recovering. The earlier broken trendline and a trendline drawn through the highs from January, now together acts as a tough challenge to overcome (41.6).

The Nasdaq Comp weekly support discussed in the previous comment is still intact, although it was slightly penetrated intra-week. The doji like candlestick could be a positive warning for the next trading week, signaled by a break of the doji high.

A look at the OEX Weekly chart, shows that this market was able to recover and make a close at minor trendline support. The close in the upper part of the trading range, reflect that buyers came to the market at the end of the week.

01/27 Weekend Update
Long Term
Once again, Wedge Resistance caused the high for the OEX trading month. The pullback and Jan. close in the lower part of the monthly range, resulted in a Hammer looking candlestick, which is often found at market turning points. So a test of Wedge support (560 area) is a likely scenario in February.

An end to this roughly 2 year long consolidation pattern, will be signaled by a monthly close, either above or below the Wedge, although Rising Wedges usually breaks to the downside. The trend developing after wedge breakouts, can be sharp in nature.

An Inside Month formed in the VIX Monthly (Volatility) Chart. So a break of the Dec. 2005 high would indicate higher volatility (fear) ahead and in turn... more pressure on the stock market. Overall, VIX is still near decade lows, (1993 to 1996) which will most likely stay intact. This fact alone, is a good reason to think the upside potential for the stock market is limited, into the Spring - early Summer time window.

The Transport Sector can give clues about the development in the economy. I.e. more activity in transport companies often reflect more activity and orders for companies in general, which is positive for the stock market and vice versa.

While DJ Transport shows a toppy wave pattern, UPS has already entered a bearish trend by it's violation of pivot lows. This will be a fact for the Fedex as well, if the pivot low fails to hold. Stocks making lower highs and then breaking it's recent swing low, could face more weakness.

From an Elliott Wave Principle point of view, a five wave impulse structure from the Oct. 2005 low, ended at the Jan. 2006 high. The OEX has since then worked on what looks like an a-b-c zig-zag corrective pattern underway, with the a-b part completed.

So odds are good the current wave c will bring prices even lower, confirmed by a break of the Dec. 2005 - Jan. 2006 lows. This strong support comes in at around 570. If it fails to hold, it could open up for more weakness, towards Weekly Trendline support, in the 550 area.

Short Term
The OEX Daily Chart shows Friday closed right above first Fibonacci support and near trendline support. With Cycle10 in the early stages of a downside pressure phase, this important support may give in to the short term bearish forces. 50% retracement support is at 566.

If the bearish trend from the Jan. high continues into the upcoming 02/16 Gann Angle convergence, this GA has the potential to force a bullish reversal. It marks 270 trading days from the Jan. 2005 low and 360 TD's from the Sept. 2004 high.

The Nasdaq Comp is just a few points from testing the cross point of two important trendlines, which gives strong support. Any weekly close below it, would signal an entry into the large wedge again and possibly more weakness. On the QQQQ Weekly chart, trendline support is already broken, although not yet a clear close below it.

The TYX is near the Apex of two converging trendlines. The directional breakout from it, could set the tone for weeks thereafter. An upside breakout is likely, given the current Cycle10 upside pressure phase.

The Dollar is still within a bullish price channel.

In retrospect, the extreme Investors Intelligence Advisor Sentiment readings in the end of 2005, again proved to be a technical warning worth listening to, with the OEX deteriorating since then.

BPI (Bullish Percent Index)

Other updated charts:

QQQQ Daily
New High - New Low Index
Put/Call Ratio

Stock Pick
For the educational purposes of this newsletter, the below company is an example and opinion of a stock with good potential and real substance.

$85.3 Million Cash
Book Value $2.83
No Debt Load
52 Week Range: $2.55 - 3.72
Outstanding Shares: 32.9M
Average Volume: 77,844
Stock Held By 45 Institutions
Price Target: $4.35 - $5.80+

Selectica, Inc. is into development, marketing, sale, and support of configuration, pricing management, and quoting solutions for electronic commerce. Its software applications enables enterprises to develop and deploy an Internet sales channel that assists their customers, partners, and employees through the processes. The company's software allows companies to use the Internet platform to deploy a selling application to various points of contact, including personal computers, in-store kiosks, and mobile devices.

Its professional services include product education, presales prototype development, training seminars, product implementation, application development, customization, integration, and education and technical support. Product sales are primarily in the United States, Canada, France, India, Japan, New Zealand, Sweden, and the United Kingdom. The current customer base is made up of many well known Fortune 500 corporations. The company has new products and joint marketing agreements in place and is well positioned for 2006. Selectica was founded in 1996 and the headquarter is in San Jose, California.

The balance sheet for Selectica is quite good, with no debt load, $85 million in cash, a $2.83 book value. In 2000 the stock was trading at $125. It has lost 98% of it's share value since then and is currently trading near a 52 week low, which is a good opportunity to buy shares cheap. This stock has good potential to increase 50-100% over the next 12 months, in my opinion.

01/27 Weekend Update
The OEX found support on the first Fib. retracement level and consolidated for a few days, before a sharp 2 day move brought prices up to the key (61.8%) retracement level, (of the Jan. decline) at the end of the week. This also represents resistance from the earlier broken trendline.

So this could be a typical a-b-c zig-zag snap-back move, before a resumption of the overall bearish trend from the Jan. high. Although not expected, a clear close above this Fib. & Trendline resistance, could open up for even higher prices and a test of the Jan. high is then the next likely event for this market. There is also resistance from a Fib. Spiral (projected from the Oct. 2005 low) a few points below the Jan. high.

Weekly Bline & Cycle10's ongoing downside pressure phase was not influenced by this week's up close in price.

BPI (Bullish Percent) sentiment readings nearly reached an overbought state (above 70) as a result of the market rebound.

Updated QQQQ Chart with EW Oscillator.

The US economy (GDP) grew 1.1% during Q4, 2005. Economists had expected a 2.8% growth. New home sales rose 1269K in December (consensus 1225K).

01/20 Weekend Update
This trading week gave more evidence that a five wave impulse structure from the Oct. 2005 low, ended at this month's high. Especially so, if the supposed Dec. wave 4 low fails to hold next week. Another technical point supporting this bearish stance, is clearly broken trendline support, which is a strong sign that the overall trend has changed.

Snap-back moves to such broken trendlines are typical and may start from the 50% (566) or key (61.8%) retracement level, if first Fib. support fails to hold (closing basis).

The now bottoming out Cycle10 suggests a reaction to the upside may occur early next week. After a potential snap-back move has ended (often up against the broken trendline) a resumption of the overall bearish trend is looked for.

The XAU (Gold & Silver Stock Index) has reached major trendline resistance, a top forming here is likely.

01/13 Weekend Update
A wave v underway from the Jan. low, reached trendline resistance mid week and made a pullback from it. Another test of this trendline is a likely scenario next week, before a near term top could be in the cards.

A Hammer candlestick formed in the QQQQ Weekly chart, near L1 DGL resistance. This, along with the strong bearish divergence observed in Cycle10 vs. price suggests a top could be forming, at least of short term degree. This view is supported by quite bullish advisor sentiment readings.

Breadth and BPI charts are updated.

01/06 Weekend Update
The 01/03 Gann Angle, (+/- 1 day) cycle convergence, mentioned in the Outlook 2006 Report had a powerful impact on the market, marking a wave iv bottom and the start of a strong rally from first Fib. support. It has already brought prices above the Nov. 2005 high. Strong trendline resistance will be met at 587 - 588 Monday, a pullback from this area is likely.

A look at a 25 RSI chart, shows a strong bearish divergence forming + it's about to enter the overbought zone, which gives support to the last wave v now well underway.

01/01 Stock Market Outlook 2006 Report

US Economic & Fundamental Condition

The main point with this Price/Earnings - P/E Chart is to show how distorted (overvalued) the stock market has been in the last decade. The S&P 500 Index has been mostly above the red line (overvalued) since 1996. To return to a fair value, (P/E 15) a drop to about 950 is required (as of Dec. 2005). Market experts are predicting that before this secular bear market from 2000 ends, years from now, P/E ratios could drop back to the green line or below (a P/E of 8-10).

Consumer Confidence
Consumers represent two-thirds of all domestic spending in the United States. So measuring consumers opinions is an important part in gauging future consumer spending, and measure economic conditions. High consumer confidence holds up the economy. Consumer Confidence numbers came in higher than expected in December, 103.6 (5.3 pts, 5.4%).

consumer confidence

Chart courtesy of briefing.com

The latest (Nov. 2005) civilian unemployment rate is 5%. This chart (courtesy of yardeni.com) shows the development since 1980.

US 30y T-Bond Yield Chart shows the development from 1983. Usually, higher yields puts pressure on the stock market. The long term falling trendline from 1988 is still intact.

The Dollar may start the new year with a pullback. It ran into strong trendline resistance at the end of 2005 and Cycle10 is quite toppy. This view is also supported by the weekly Doji candlestick formed in the EUR/USD currency pair, possibly marking a bullish reversal. A potential weaker dollar is positive for this pair.


Kondratieff Cycle
According to the studies of longwaveanalyst.ca there are four "seasons" in this 50 - 60 year long Cycle, Spring, Summer, Autumn and Winter.

Stock prices perform well in the Spring with recovery in the economy as well. The last Spring phase was from 1949 to 1966.

The beginning of the inflationary summer is indicated by a peak in the spring bull market in stock prices (Last summer 1966 - 1981).

The end of summer primary recession is caused by the cycle peak in interest rates. This recession is one of the four indicators signaling the beginning of the huge autumn stock bull market.

Four events occur at the end of summer and anticipate the beginning of autumn:

1) A peak in prices
2) A peak in interest rates
3) A bear market in stocks
4) A primary recession

It's the period of rampant speculation in real estate, bonds and especially stocks (1982 - 2000).

Beginning signaled by the peak in the prices of the large autumn stock bull market. The purpose of the winter is to cleanse the economy of debt via payback, liquidation and usually bankruptcy. This process creates tremendous stresses to the economy and financial system. (2000 --- >) The next Spring should again bring growth and prosperity.

4 Year Cycle
More often than not, the 4 Year Cycle bottoms occur at or near larger bottoms in the stock market.

39 Week Cycle
The next bottom is due in March 2006. Chart

WCA Model
The WCA Model (courtesy of wcamodel.com) is an original cyclical method for predicting the US Stock Market. A 2006 projection for the Dow 30 indicates further advance into May, given there is no inversion. Should be used with other indicators for confirmation.

Stock Market

Mid & Long Term
Dec. 31, 2004 the OEX stood at 575.29. 1 year later, it stands at 570, 5.29 points (0.9%) lower. Monthly MACD is still in bearish mode, after generating a conservative sell signal in October 2005.


Using the S&P 500 as benchmark, the broad market just barely gained ground in 2005, + 36.37 points, (3%) with several significant dips seen on the path higher. Prices have oscillated within a tighter and tighter Rising Wedge pattern throughout the year. Prices usually breaks to the downside from such wedge patterns.

This index reached the key 61.8% Fibonacci retracement level (of the 2000 - 2002 decline) in November and the Dec. trading month formed a Hammer (reversal) candlestick, closing up against this resistance. The high for the month was caused by the upper wedge line. Trend reversals are often seen at this key Fib. level. Any monthly close above it may delay a top further and if the 78% retracement is ignored as well, a major Double Top scenario (from 2000) could then be the next likely event, long term.

The Nasdaq Comp. Monthly has built up tremendous trendline resistance from Jan. 2002, once again pulling back from it in December, for the third time since 2004. Any clear monthly close above it, could be quite bullish for the tech market, in the months thereafter. On the other hand, if it breaks below strong trendline support instead, it may go for a test of the 50% - 61.8% retracement area (of the 2002 - 2005 advance). That breakout would be a strong signal of where the market is heading in the month(s) thereafter.

A look at a long term QQQQ Monthly chart, shows that Stochastic has formed a bearish divergent pattern and has left it's overbought zone. The Hammer looking candlestick up against trendline resistance, smells more price weakness to me.

Two significant supportive Volume spikes were generated during the market decline in July and October, 2002. Currently, there is no resistive volume spike of a similar magnitude that would indicate a long term trend reversal. So using Volume analysis isolated, the long term market outlook remains positive at this point.

However, when divergences shows up in the New High - New Low Index, it's often a powerful warning for the stock market, so a significant correction first, is a likely scenario. In this case, a triple NH-NL bearish divergence vs. the Dec. new peak in prices, is a strong message about what is soon to come (if not already started) for the market, a correction of minimum mid term degree.

A strong triple divergence is also observed in the MACD indicator, plotted on an OEX Weekly Chart. Strong trendline support comes in at around 550, should the weakness continue.

Short Term
2006 starts with the 01/03 Gann Angle, (+/- 1 day) convergence. With a near term bearish trend going into it, it could mark the end of wave 4 at Fib. support. See daily chart.

Elliott Wave
Using the Elliott Wave Principle, a major five wave impulse structure from the 2002 low, could be in it's last stages. Given the three wave looking, corrective pattern from the Nov. 2005 high, one more move to the upside is not out of the question. If so, that would be the last wave 5, as part of a five wave structure from the Oct. 2005 low.

That could also complete an one degree higher wave 5, as part of a major five wave impulse from 2002. This, in turn, could mark the end of wave A, as part of an huge A-B-C zig-zag from the 2002 low. After the wave B part has ended to the downside, (50 - 61.8% retracement area) a test of the key retracement zone or even the 2000 high in wave C, is one scenario looked for, in the future.

A lower ranked, alternate count suggest that this full A-B-C will end this coming Spring. In this scenario, the wave A ended with the early 2005 high, then ended wave B in October, with wave C now underway to the upside.

Bradley Indicator
As i wrote in the Outlook 2005 Report:

..."The Bradley Siderograph is a popular indicator many traders rely on, to get an overview of possible larger turning points in an upcoming trading year. It is known for it's inversions, so it's not so good in showing whether highs or lows are coming but more so ... when major highs and lows can be expected. So using other indicators in combination with the Bradley could give useful clues about larger tops and bottoms."...

For 2006 it shows an up trend for roughly the first half and then a down trend into the end of Nov. 2006. However, the forecast into the end of 2005 is most likely inverted, so the 2006 forecast may also be inverted in part or in full. If so, a significant top could already be in place, in line with major divergence patterns.


Chart courtesy of amanita.at

Bradley dates indicating significant market turning points in 2006:
  • May 20
  • November 28

    The May 20 Bradley date happens to be in the same time window as the weekly Gann Angle due May 19. That GA convergence marks 90 trading weeks from the 2004 low and 180 trading weeks from the Nov. 2002 high. So a larger trend reversal around that date is likely. The mid term directional trend going into it, would indicate a reversal in the opposite direction.

    Artificial intelligence (Neural Networks) can be an helpful technique in getting clues of market turning points, months into the future. An example chart from 2005 (look for a 2006 Update in a few days). Inversions can also occur in neural network calculations. In combination with other indicators, it's helpful in finding out when larger trend reversals may occur.

    An update of the long term Murrey Math Lines shows that prices are hovering around 50% line, between the major 4/8th - 5/8th MML's. In case the rebound from 2002 continues in 2006, the major 5/8th MML would act as stiff resistance.

    Dynamic Gann Levels
    When projecting DGL's, the first (23.6%) Fib. level is normally not used in this technique, only the 38.2%, 50%, 61.8% and 78.6% levels. For new subscribers, see the perfect hit (2004 peak) of this rare DGL, projected from the 1994 low. This DGL is still intact after the 2005 trading year and would be strong resistance, if tested in the future. This DGL touched several important highs and lows, from it's projection point.

    Fib. Spiral Projections
    This Fib. Spiral Projection from the 1994 low is interesting as well. Larger corrections in the past have started when the OEX met spiral resistance. I.e. the Fall 2002 high came right at spiral resistance, see how it followed the spiral lower, struggling to break through, which it finally did in early 2003.

    Here is another one, a Dow 30 projection from the 1974 low. I.e. see the perfect hit of a spiral line, before the 1987 crash started.

    Projections for Gold and XAU (Gold & Silver Stock Index). Gold met spiral resistance a few weeks ago and made a pullback. If overcome, it would open up for even higher gold prices, towards the 650 - 700 area.


    Put/Call Ratio
    A long term overview of the Put/Call Ratio back to 1990. When put volume numbers becomes extreme (i.e. above 1) in relation to call volume, it is an indication of extreme bearishness in the market. Being a contrarian indicator, this is usually bullish for the market. The indicator is inverted on the chart.

    When call volume numbers becomes extreme (i.e. below 0.50) compared to put volume, it reflect extreme bullishness in the market. This is usually bearish for the market. When extreme numbers shows up, odds are good a larger top or bottom is forming. The Put/Call Ratio is calculated by simply dividing the number of puts by the number of calls. The raw numbers can then be smoothed by using a moving average. A 10-day moving average is used here.

    Investors Intelligence Advisors Report
    This survey has been widely adopted by the investment community as a contrary indicator and has had a consistent record for predicting the major market turning points. Again, the extremes in investor confidence is looked for, conditions which are often seen at major market turning points. Here is an overview from 1978 to present. Current advisors sentiment is getting quite bullish.

    Bullish Percent
    BPI (Bullish Percent) sentiment ended the year at 64.7. Readings above 70 is considered an overbought state.


    Chart courtesy of stockcharts.com

    URL for 2006 Report: http://oextradingresources.com/stock-market-outlook-2006.html






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