Stock Market Rally, Is There A Cloud In The Silver Lining?

By: Charles_Maley

Stock-Markets
My brother Jim has been trading the markets for over thirty years. Yesterday, we got involved in a conversation about the markets and the stock market in particular. He always does a good amount of research to support his own trading decisions and since sharing observations is one of the reasons I started this blog, I thought we should at least be aware of these points.

According to Jims work:
* The Market PE is historically overvalued. The Current PE is @ 17 on the S&P.
* The Stock Market is overbought when measured by the number of stocks above their 50 day moving average lines.
* Bullish Sentiment is high. The Daily Sentiment Index (DSI) hit 89%. This reading is the same as the Oct 2007 high.
* Investors Intelligence, AAII registered 19% bears. This is the same reading as the time high reading.
* The trading volume is poor. There is less volume on each push up.
* Insiders are selling at 28 times the amount they are buying.
* September is traditionally a tough seasonal month. 17 out of the last 20 years have been down.
* Markets have rallied up over 50% off the bottom in 5 months. This is the farthest and fastest in history.
* The NASDAQ 100 has retraced over 50% of the decline off the all time highs.
* The SP has retraced 40% of the decline.
* The Aug 24th high was not confirmed by the 24 day RSI and MACD reading creating a divergence.
* The Shanghai index has dropped over 20% from the highs. This market bottomed before our markets and led the U.S rally up.
* 25% of NYSE volume recently has been FNMA, Freddy Mac, and Citicorp, all low price stocks that the public buys. (speculation)
* The volatility Index (VIX) hit a new low on 8/25 confirming the bullish sentiment readings. This is a signal of NO fear in the markets.
* There was no bullish reaction to the Bernanke nomination and other improved economic news. Perhaps the tone is changing.

Charles Maley
www.viewpointsofacommoditytrader.com