THE DOT - if this turns orange or red be alert

Friday, December 10, 2010

DEFCON 2 for stocks - about to raise to DEFCON 1

1 We have reached levels not seen in a very long time ISE call/put ratio is at levels we had 18th Jan and end of April last time even more bullish with all factors considered. What followed was a 10% decline in both cases but we are rather preparing for a more destructive set up but that rather will happen after NYE. Second day above 200 for the ISE ratio and here some more samples where we stand in bullish sentiment. SPX made the 13 count today and will close with an 11 weekly count - once that is in we raise to DEFCON 1 but even for right now we have potential for a sharp pullback before year end as the Senate votes on Monday 3 p.m on the tax issue. More importantly is the EURO looks poised to retest the 1.30 level anytime soon that will only happen for one reason deep trouble coming up once again and Bonds look troublesome as well heading into next week.

excerpt

Rydex Nasdaq 100 Bull/Bear Ratio At Highest Since Dot Com Collapse





And for another confirmation that the Nasdaq is now at the same extreme "irrational exuberance" levels last seen during the dot com crash, we read courtesy of sentimenttrader.com that the Rydex Nasdaq 100 bull/bear ratio is now the highest it has been since just before the dot com crash. "Traders in the Rydex mutual fund family have poured into the Nasdaq 100 long fund at the expense of the inverse fund on the same index. These traders now have 34 times more money invested in the long fund vs. the inverse fund, which is the highest ratio since the bubble days of 2000 and early 2001." And what is scarier, is that unlike during the dot com, investors are using leveraged methods to express their exuberance: "The Bull / Bear Ratio for the leveraged funds isn't quite as extreme...but it's close (on a relative basis)."

excerpt 2
DateNAV Adjusted N/U Ratio
12/080.605
12/070.578
12/060.526
12/030.515
12/020.512
12/010.490
11/300.485
11/290.498
11/260.500
11/240.502
11/230.498
11/220.495
11/190.459
11/180.463
11/170.508
11/160.474
11/150.485
11/120.475
11/110.512
11/100.511


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