Dr Faessel MARKET 10-4-2010

NYSE Composite Index at Highs last ticked on May 4th

BULLISH SENTIMENT ESCALATING (a danger)*... but

OVERBOUGHTNESS (MCCLELLAN) IN NEUTRAL

STILL MORE TO GO...

Key bond market data points like the Ted Spread** and the Barron's Confidence Index*** also continue with "all-clear" readings.

SHORT SQUEEZE COULD FIRE if we breach (SPX) 1150

Two weeks ago we broke-out through the significant overhead resistance in the major indexes as best seen in the S&P 500 (SPX) at 1130 as I predicted. Since then, the extremely well-bid market in a back-and-fill fashion has chugged higher also remaining in McClellan neutral.

Much like in last couple of weeks studies I believe there is more upside based on the escalating, but not yet excessive sentiment overview and overbought / oversoldness that's remained in neutral. Importantly, discerning overviews of bullish / bearish configurations fed by increasing money flow in leading stocks continue to indicate a still bullish set-up.

Also, "price" is set to be ready to sail through a trading void created by the abrupt downstroke that ripped off 140 S&P 500 (NASDAQ: SPX) points in the first week of May. There is minimal resistance in such fortuitous setups and set-ups like this breed major short squeeze once ignighted.

Both the 50-day and 200-day moving are now behind us (support) and sloping up, plus the reverse head and shoulders “bottom” is still operational.

The former stiff resistance and now key support in the (SPX) is at 1128 / 1131. Short term trendline support in the S&P 500 (SPX) is 1144. More robust price support is at 1139 then 1124 and 1110. 200-day moving average support in the (SPX) is 1118. The deepest support lows are the July lows at 1011.

4-session price resistance in the (SPX) 1150 is the next overhead barrier.

The next major price (and trendline) resistance at the (SPX) top of 1174. The recovery high (and what will be most important resistance) is at (SPX) 1219.80 was visited on April 23rd.

** The Ted Spread a gauge of bank cash availability that's the difference between what banks (3-month Libor) and the Treasury pay to borrow money for three months bills was at 14.05 basis points today, after reaching of 13.48 basis points, the lowest tic since April 5th.

In early & mid March the Ted Spreaddropped to a posting of just above 10.5. But by June 10 it ran up to 48 in the Euro / Greek panic. The Ted Spread 2008's high (the height of the global credit crisis) of 464 points was in October 2008. It averaged 37 basis points in 2006.

One item of note: World steel demand for 2011 is estimated to be up 5.3% to all-time high levels.

Key indicators and metrics:

·        Friday's McClellan Oscillator is at a neutral plus 68

·        The Treasury 10-year 2.526% lowest yield since July 2009

·        3-month $ LIBOR slides deeper to 0.289

·        CBOE Put / Call Exchange Volume Ratio – 0.82

·        (VIX) – 22.50

·        Euro - 1.3772 highest since April 

·        Copper - 3.6835 the highest tick since July 2008

CONTRARY INDICATOR & WEEKLY SENTIMENT:

BULLISH longer-term investor sentiment readings are MIXED; two of which are in the BE CAREFULL mode.  All the surveys are well off their deep and “foreboding' lows of the recent couple of months.

(High BULLISH readings in the Investor Sentiment Readings usually are signs of Market tops; low ones, market bottoms.)

* High ‘enough' Bullish reads suggest - CONCERN

·       The Consensus Index BULLISH investor sentiment survey was rose to (21-week highs) at 63% BULLISH. the highs of Bullish sentiment of 76% were reached in the first week of May just prior to the huge down-leg. Last week was at 58%. The prior 9-weeks were 51%, 50%, 41%, 42%, 47%, 51%, 50%, 44%, and 34%. (The low of this market retreat)

·       The Market Vane (Market Letter Survey) posted a BULLISH read of 55.9% The preceding 12-weeks were ― 53%, 50%, 48%, 43%, 42%, 46%, 50%, 48%, 50%, 44%, 46% and 39%. (The low of this market retreat) 18 weeks ago it posted the high of the cycle at 53%.The highs in 2009 were 58%. In 2007 it was above 70% BULLISH.

STILL OK:

·       The AAII Investor Sentiment SurveyBULLISH read was down to 42.5 from last week's read high of 45% The prior 8-weeks were 50.9%, 43.9%, 30.8, 20.7%, % (the low of the pullback) 30.1%, 39.8% and 30.4%. [The lows registered on March 9th 2009 were an historic low posting of 18.9% only BULLISH.]

·         The AAII Investor Survey ofBEARISH sentiment ticked up a few percentiles to 31.6% from last week's low of cycle at 25.4% (The recent down cycle started in early May. The prior 11-weeks were 24.3%, 31.6%, 42.2%, 49.5%. 42.5%, 30.1%, 38.2%, 33.3%, 45%, 37.8% and 57.1% the highest Bearishness of the market retreat.

A GOOD THING

*** The BARRON's Confidence Indexhad a big percentage advance of over 3-points to 77.6 from last week's read of 74.5. The low of the recent market retreat in May had the Index at 72.9 on August 29th. The Index registered new highs of the cycle on June 4th at 79. One year ago it was 67.3. The ability to hold at these relative highs suggests that the recovery chugs on.

A falling confidence index reflects decreasing confidence in the market. Historically, healthy BARRON's Confidence Index numbers are in the 80's.

The Confidence Index is the High-grade bond index divided by the Intermediate grade and is a premier measure of how the bond markets many $ trillions are allocated. The discrepancy between the yields is indicative of investor confidence. There had been a solid improvement in the spread ratio since its all-time low of 45.2 in December 2008, indicating that bond investors are growing more confident and have started opting for more speculative bonds over high-grade bonds. The recent retreat in numbers is definitely a danger alert.

STOCK OF THE DAY

One more time and looking higher yet –51job, Inc (NASDAQ: JOBS)  $38.96. And it's just breaking out to new multi-year highs and of a 5-year pattern. I've mentioned this issue a couple of times before. The stock has an incredible chart, ck both the weekly and daily graphs. (JOBS) is continuing to move up on skyscrapers of volume increase. The company provides integrated human resource services to employers and job seekers primarily in the Peoples Republic of China. Has a high forward PE of 33 but looks to grow 40% to 50% per annum over the next few years. Market cap $1.08 billion.http://www.51job.com