Dr Faessel 2-22-2011

THE MID EAST UNGLUED OIL PRICES SURGE 9.1% ON LIBYA CRISIS ALERT: McClellan Oscillator Posts Narrow Range Days* BULLISH Sentiment, as measured by the Bank of America / Merrill Lynch Global Fund Manager Survey registers its highest bullishness in its 10 year history. Also, the AAII has been above its historic average for 24 consecutive weeks, the second-longest period ever. (Complete overview below) ** Last week the Dow, Nasdaq, Dow Transports and semi- conductor index (SOX) tick at new cycle highs, but no matter; the geopolitical eight ball in the Middle East is now the market driver. Global oil supply worries have crude oil surging over 9% due to the Libya crisis and the Suez access question. S&P futures are off 16 points so it appears that a pullback might turn into a decent correction is underway. Certainly at this time, the Middle East turmoil is unquantifiable and market flux will be the order of the day. The recent 30% market acceleration that began on July 2 has evidenced a super tight channel where only a 1% retracement (that has occurred 13 times) indicating an incredibly "well bid" market with major players wanting to buy. Over the last month and a half money inflows into the market have averaged near $5 billion a week. The Bank Index (BKX) recently closed at 10-month highs that further exemplify the market health. The important Durable-Goods gauge of economic activity, is supposed to be up 2% in January analysts say. This key number will be reported on Thursday. * The McClellan Oscillator (favorite overbought/oversold indicator) while still in neutral at a plus 95 on Friday follows Thursday's post of plus 97 indicating back-to-back narrow range days. This indicator has shown time and again the ability to forecast big market 2% moves, usually in the direction of the recent trend (that would be up) but obviously it looks like a sharp downstroke is in the cards. No matter that over 70% of the S&P 500 companies have come in with earnings results that have beat analysts' expectations. So, interesting that today's early market reads that might give us a hint how the market will play out today are fairly well contained within their respective channels. Foreign currencies, our Treasuries, gold and industrial metals are taking their hits, but so far I see no panic. In fact, pretty much almost all early market reads are coming off their weekend/holiday lows. This well might be just another buying opportunity for those $trillions on the sidelines that have missed the terrific move off those July lows. Unless all hell breaks out I'm a believer that the trend holds and we retrench. Let's note that the S&P 500 (

) is now up over 100% from its (

) 666 lows of March 2009. The 50-day moving average support in the S&P 500 (

) is at 1283. 200-day moving average support is 1165. Additional key “price” support and former resistance in the two levels in the (

) at 1225 then at 1146 / 1150. Big deal of note; BHP Billiton Ltd

, the world's biggest mining company, agreed to buy Chesapeake Energy's

Fayetteville gas assets in central Arkansas for $4.75 billion in cash, entering the U.S. shale gas business. BULLISH Sentiment as measured by AAII has been above its historic average for 24 consecutive weeks, the second-longest period ever. (See complete overview below) ** California Death Watch: The state's annual retirement costs for public workers have risen to about $6 billion a year, from $1 billion in 1990 and $2 billion in 2000. Retirement and health care now represent a third of California's general fund payroll costs, and in some local governments they hit 50% -plus. A Stanford University analysis of CalPERS and pension funds for teachers and University of California employees found that if a no-risk "discount rate" was used, (from their unrealistically high assumption of future earnings: 7.75% a year) California's unfunded liabilities would explode to about 25% of California's total economic output. Friday's postings of key indicators and metrics: · Friday's McClellan Oscillator is in neutral @ plus 95 · Thursday's McClellan Oscillator is in neutral @ plus 97 · Friday's Gold (COMEX) $1382 · The Treasury 10-year 3.589 · 3-month $ LIBOR at 0.312 · CBOE Put / Call Volume Ratio – 0.92 · Euro – 1.3681 · VIX – 16.43 · US Dollar Index – 77.72 · Copper – 4.47 Tracking the Bond Markets $ Trillions – The BARRON's Confidence Index came in at 83.1. Last week's number was at new cycle highs of 83.7. The recent numbers are at levels not seen since the fall of 2007. The Confidence Index is the premier measure of how the bond markets trillions (total global is around $91 trillion and USA is 39% of that) are allocated: (The bond market is twice the size of the stock market.) The ability of this key indicator of market health to post new highs bodes well for the economic recovery and for stocks to continue forward. One year ago it was 75.9 Key WEEKLY SENTIMENT (i.e. CONTRARY INDICATOR) data points: * Consensus Bullish Investor Sentiment came in mixed but with a slightly higher bias. A week ago we were in the middle Egypt, Tunisia turmoil. Lets again note that recent consensus cycle-high bullishness is a worry. (High BULLISH readings in the Investor Sentiment Readings usually are signs of Market tops; low ones, market bottoms.) · The Consensus Index BULLISH investor sentiment ticked recovery cycle highs at 74%. The multi-year highs in Bullish sentiment of 76% were reached in the first week of May 2007 just prior to the huge down-leg. · The Market Vane (Market Letter Survey) again ticked new cycle highs at 67% matching last week's number. Market Letter writers are now at levels of Bullishness not seen since late 2007 when the Market Vane registered above 70%. · The American Association of Individual Investors [AAII] Investor Sentiment Survey of BULLISHNESS slipped again to 46.6% from last week's 49.4%. Just over two months ago it ticked new cycle highs of 63.3%. The low of the May selloff cycle at was at 30.1% [The lows registered on March 9th 2009 were an historic low posting of 18.9% only BULLISH.] · The AAII Investor Survey of BEARISH came in at 25.6% well off the high Bearishness set 4-week ago at 34.3%. Eight -weeks ago it posted cyclic Bearish lows at 16.4% that were lows not seen since 2005. The highest Bearishness occurred 6 months ago when it ticked the summer “market retreat” high at 57.1%. Item of note: In August 1987 it ticked the lowest low ever recorded at 6% BEARISH – Remember what happened on October 19, 1987... · The Citygroup “Panic / Euphoria” Model ticked up to a plus 0.28 from, 0.18 the prior week. Six weeks ago it ticked new cycle highs at plus 0.32. Friday's posting is about 2/3rds up in the high end of the “neutral” zone.