Back in the Saddle

After the flu, most likely H1N1, and and a R & R trip to the cool and foggy west coast of the US, I'm back.

 

I've made almost no changes in portfolio except that some, but not all, minor standing limit sell orders for some oil and gas trusts and golds when they got above upper limits, got filled, and I bought some additional SLW yesterday on the metals pullback.

 

The Dow picture and prognosis from two weeks ago remains valid. The down trend line at about 8475 on the Dow needs to hold.  Sentiment remains less bullishly orientated than one would expect near a bear market rally high, so it probably isn't one.

 

A very astute cyberfriend of long standing sent me this message and chart today about the ISEE index:

"First daily reading below 100 for a very long time.

 

Does it mean anything, I wonder?

 

I would like to see one final market plunge here.  And, sure, there are signs the economy isn't falling as fast as it was.  But no sign yet that is actually gonna turn up. 

 

Perhaps next month we will see some indications?  Then again  .............. "

 

ISEE
ISEE	98	6/17/2009
10-Day Moving Average	129	6/4/2009-6/17/2009
20-Day Moving Average	132	5/20/2009-6/17/2009
50-Day Moving Average	133	4/7/2009-6/17/2009
52-Week High	220	3/9/2009
52-Week Low	66	9/19/2008

ISEE is a put/call index similar to CBOE's but restricted to new stock options positions.

 

This is what I wrote back, similar to my earlier posts here on the 2CS:

 

"Hi xxxx,

 

"If I understand the ISEE indicator correctly it is showing the most bullish sentiment number since 3/9/2009? My 2CS just had it's most bullish number since 3/9/2009 on Monday when it was 114.

 

"Within the past hour I wrote this to  zzzz and yyyy: (Note the error in it about 117 being the low. I didn't see the 114 number until just now.)

 

"The sentiment stuff  I do suggests this current move down
is not likely the start of a Neely-oid crash move. The lowest my 2cs (5 day
total of each day's cboe p/c * each day's VXO) has been is 117 on last
Friday. That's still a fairly high level of fear and loathing even for a
bear market rally top. It should at least go into the mid-90's. Most bear
market highs from 2000 to 2003 went into the 70's.  People were then still
hopeful of suddenly regaining the all-time highs since those highs were
still close in time and therefore in memory. That's why i'd start to get
bearish now in the 90's and 80's and not wait for 70's."

 

I would interpret  the ISEE in the same way, xxxx. It's starting to get more bullish in sentiment but probably not bullish enough yet for an intermediate term top. Of course I reserve the right to be wrong...(;^)) ........""

 

It looks like a normal exhalation in stocks after a strong move up which is not widely believed in. I'm scarcely in "generic" stock index type stocks anyway except for ETY which is a "buy/ write" blue chip options fund and a small position in VWINX in a family member's account. Most other stocks I have are orientated toward inflation beneficiaries. LSBDX's corporate bonds do tend to trade somewhat with the stocks of the same companies.

 

I am reading almost equal numbers of urgent deflationists and urgent inflationists which suggests to me more of this churning action we now have lies ahead this month and into next month.