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**Jim Nickerson** · October 28, 2006, 09:16 PM

Re: Bearish Information re: itulip

For the moment I hate to disappoint anyone looking here for current items denoting bearishness; however, this site--iTulip--is essentially bearish in its general content. Anyone interesting in offering additional bearish items should be free to jump in.

**Jim Nickerson** · October 28, 2006, 11:25 PM

Re: Bearish Information

From today's online Barron's (Subscription required) in Alan Abelson's "Up and Down Wall Street" column.
http://online.barrons.com/article/SB..._magazine_home

"Besides the shaky fundamentals beneath this extended stock-market upswing, there are technical reasons to be cautious. And these were laid out nicely in a recent communique we received from a chap named Frederic Ruffy, who's an analyst with Optionetics.

He advises one and all to "put away the Dow 12,000 party hat." Among the arguments for restraint he cites are crummy market breadth, a relative paucity of Big Board new highs, even while the Dow has been hitting one peak after another, and a rise in bullish sentiment generally in every sounding from Investor Intelligence's survey of advisory services to the American Association of Individual Investors' poll.

And within his own bailiwick, the Chicago Board Options Exchange, he reports the put/call ratio has been signaling a possibly dangerous lopsided optimism (calls are way up, puts are way down) on the part of traders.

Once the earnings-reporting season is over, he believes, investors might very well start to sober up as they dwell on less ebullient elements like housing, the election and what's happening in the real world.

Friday could well have been an intimation of just what Frederic Ruffy is suggesting." So wrote Abelson.

Regarding sentiment polls.

This past week Investors Intelligence bulls reached 52.7%, bears 30.1% Compare that to week ending 4/13/06, bulls then were 53.2% and bears 24.5%. The SPX temporarily topped on a weekly closing basis at 1325.76 on 5/5/06, so the high in bulls preceded by three weeks the just noted high.

The AII last week reported 54.2% bulls, and 29.8% bears. This week: 52.2% bulls, 30.4% bears. The highest it got in April was 47.7% bulls, 23.3% bears on 4/7/06--4 weeks before SPX closed at 1325.76 weekly close. AII the week after the "top" in SPX was 54.9% bulls, and 27.5% bears--so this indicator topped as the market did.

Consensus Bulls data reported in Barron's lags by a week. For market week ending 10/20/06 the reading was 74% (only the number of bulls are reported). It also reached 74% on 9/8/06. It reached 73% on 3/31/06, before the above noted high for the SPX, i.e. it preceded that top by five weeks. It was 71% in the week after the above "top."

My general impression of these data is that they tend to peak some weeks before major indices may peak, though they may at times closely approximate the peaks in the indices.

My personal opinion is that the equity markets will run some weeks, how many is anyone's guess. On a contrarian basis, these bullish sentiment readings are bearish.

**blazespinnaker** · October 29, 2006, 01:48 AM

Re: Bearish Information

Actually JK has posted two really excellent threads below which I think are the most bearish information I've seen in a very very long while:

http://www.itulip.com/forums/showthread.php?t=549

http://www.itulip.com/forums/showthread.php?t=551

**bart** · October 29, 2006, 10:35 AM

Re: Bearish Information

Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) on Saturday estimated that October sales rose just 0.5 percent at its U.S. stores open at least a year, hurt by disappointing apparel demand and disruption from store remodeling efforts.

The world's biggest retailer had originally forecast 2 percent to 4 percent October same-store sales growth, but warned earlier this week that the figure would likely be closer to 1 percent.

Wal-Mart, the world's biggest retailer, has been adding more upscale merchandise such as flat-panel televisions and trendy apparel in a bid to get wealthier shoppers to buy more.

But the fashionable clothing has not sold well this fall. Wal-Mart said at an analyst meeting this week that it went too far in adding trendy lines and did not stock enough of the basic fashion apparel that appeals to its core customers.

The company also acknowledged that remodeling projects at hundreds of its U.S. stores disrupted sales more than it had predicted, although sales rebounded once the jobs were completed.

Wal-Mart and most other major retailers will release final October sales reports on Thursday.

http://today.reuters.com/news/articl...ES.xml&src=rss

**Jim Nickerson** · October 30, 2006, 09:24 AM

Re: Bearish Information Re. Multiple mkts up & down

http://buythebottom.blogspot.com
Comments on RUT, NDX, SPX, DJI, OIL, GOLD. Brief comments and charts worth looking at in my opinion.

**Jim Nickerson** · October 31, 2006, 01:03 AM

Re: Bearish Information Re. Market Climate

http://hussmanfunds.com/wmc/wmc061030.htm

jk, put me, and anyone else who has read all of his posts on iTulip, onto John Hussman, PhD. Hussman runs money; has to me a big fund and a smaller one. I have put some money in Hussman's HSGFX--the larger fund, it is all the general equity exposure I have right now.

Hussman's makes what to me is a rather detailed commentary either late on Sundays or early on Mondays. It stikes me that he is running his fund to not lose money and to make money. Some of his comments are a bit over my head, but I do not take it that he is BS'ing in what he writes.

I think he makes some very worthwhile comments in explaining his position on the markets, and how things may turn out. My recommendation is to read his comments. He is not bullish, but he is not discounting that the markets can go up from around where they are now. Read it.

**Jim Nickerson** · October 31, 2006, 10:11 AM

Re: Bearish Information Re. Mamis, Rubin, David Levy

http://articles.moneycentral.msn.com...omyAtRisk.aspx

By Bill Fleckenstein, generally bearish comments by Justin Mamis, Robert Rubin and Levy.

Rubin "shared his views on the dollar: "You have to figure out some way -- which I have not done, I might add -- to protect yourself should we have a real currency problem here. (He makes a number of points about why that could occur.) I'm not saying what the odds are. I have no idea. Maybe the odds are very low. But that is one concern.""

**Jim Nickerson** · November 02, 2006, 02:00 AM

Re: Bearish Information Re. Sentiment

http://www.marketwatch.com/News/Stor...d=myyahoo&dist=

Mark Hulbert, Market Watch

"Stock market sentiment among investment newsletters is now higher than it has been in nearly five years."

"Consider the latest readings from the Hulbert Stock Newsletter Sentiment Index (HSNSI), which reflects the average recommended stock market exposure among a subset of short-term stock market timing newsletters tracked by the Hulbert Financial Digest. As of Monday night, the HSNSI stood at 67.0%.
To put this high reading in context, consider that the HSNSI's average reading since the bull market began on Oct. 9, 2002, has been just 29.5%, or less than half the current sentiment reading. In other words, the wall of worry that has on average existed during this more than four-year bull market has now evaporated."

"A potentially even more alarming conclusion emerges when we focus on just those market timing newsletters that focus on the Nasdaq market in particular, as reflected in the Hulbert Nasdaq Newsletter Sentiment Index (HNNSI). This index, which reflects the average recommended exposure to the Nasdaq market among such newsletters, now stands at 66.7%.
That's the highest level for the HNNSI since Jan. 4, 2005, nearly two years ago. Furthermore, the current level is nearly seven times larger than the average level for the HNNSI since the beginning of the bull market on Oct. 9, 2002. (That average stands at just 10.0%.)"

"...this does not guarantee that a major bear market will begin from here. Bullish sentiment conditions could reappear, and give the bull market renewed support, if newsletter editors are quick to throw in the towel during the next significant market correction. But contrarians aren't holding their breath. The editor of the average short-term market timing newsletter is currently giving every indication that he thinks happy days are here again to stay.
More often than not, in the past, such optimism has not been vindicated."

Current Investor's Intelligence numbers:

Date Published	Percent Bullish	Percent Bearish
11/1	53.7	28.4
10/25	52.7	30.1
10/18	52.2	30
10/11	52.2	30.4
10/4	49.5	33.3
9/27	47.4	33.7
9/20	47.4	33.7
9/13	45.8	35.4
9/6	43.2	33.7
8/30	42.1	33.7

from http://www.schaeffersresearch.com/st...inv_intel.aspx

Lot of bullishness out there in the world according to these data.

I think as they used to say on Hill Street Blues after the morning briefing, "Let's be careful out there."

**Jim Nickerson** · November 03, 2006, 12:22 AM

Re: Bearish Information Re.Gold

Mark Hulbert 11/3/06

http://www.marketwatch.com/News/Stor...o&dist=myyahoo

Gold rush
Commentary: Despite bulls' optimism, at least one more correction likely.

"As recently as Oct. 13, just 14 trading sessions ago, the HGNSI stood at minus 25%, which meant that in mid October the average gold timer was so bearish that he was recommending an aggressive bet that the gold market would continue to decline.

Just as contrarians argued at the time, the gold market rallied in the wake of such thorough-going skepticism. Gold bullion is trading for around $35 more per ounce today than then.

But the gold timers' eagerness in recent sessions to give up on their bearishness and turn bullish has been nothing short of amazing. After all, a $35 rally is not so strong as to justify throwing all caution to the winds. Yet the average gold timer's recommended exposure to the gold market has risen nearly 80 percentage points in just 14 trading sessions.
A particularly telling contrast is between the HGNSI's current level with where it stood this past May, when bullion was more than $100 higher than where it is now. If gold timers were reacting normally, they would be significantly more discouraged today than then. But they are not reacting normally. When gold hit its high this past May, the HGNSI stood at 51.8%, two percentage points lower than where it stands today.

In other words, the average gold timer is more bullish today than he was when gold was more than $100 higher."

jk · November 03, 2006, 09:38 AM

Re: Bearish Information Re.Gold

Originally posted by Jim Nickerson

In other words, the average gold timer is more bullish today than he was when gold was more than $100 higher."

gee, imagine being more bullish when an asset is cheap than when it's already expensive!

**Jim Nickerson** · November 09, 2006, 02:24 PM

Re: Bearish Information

http://onlinejournal.com/artman/publ...cle_1411.shtml

If you need a bearish "energy bar," perhaps this is it.

Originally posted by Mike Whitney

No one knows what is in store for these high-risk hedge funds which have only been in existence for a short time and into which Americans have dumped trillions of their hard-earned savings. As Kolko says, “The credit derivative market was almost non-existent in 2001, grew fairly slowly until 2004, and went into the stratosphere, reaching $17.3 trillion by the end of 2005.”

Is it any wonder why the main players at the Fed, the Treasury and the SEC are feeling a bit jittery?

Any shock to the markets could set off a system-wide catastrophe. Just this week, for example, Taiwan was bracing for a stock market crash following the surprise indictment of first-lady Wu Shu-chen. Even relatively small incidents like this on the other side of the world create the potential for contagion that can spread rapidly in this new world of globalized markets. The danger is even greater when those markets are built on foundations of sand.

Hank Paulson was doubtless selected as Treasury secretary as the best possible “industry-insider” to oversee the unwinding of America’s humongous account imbalances and flimsy “deregulated” markets. His job is to ensure that, at the end of the day, US banking giants, the Federal Reserve, and western elites still control the global economic system and that the dollar reigns supreme. Whatever happens to the American middle class in the process is of no consequence.

But Paulson faces an insurmountable task from this point on; fudging the numbers only works for so long. So far, the greenback has benefited from the manipulation of oil prices, but that will soon end. (Better “fill ‘er up” now) The US economy is a shriveled shadow of its former self; housing and manufacturing are in a shambles and growth depends entirely on the expansion of debt. As GDP begins to nosedive, foreign investment will dry up, capital will flee to more promising markets in Asia and Europe, and the American people will totter into a barren world of soaring unemployment, hyperinflation, and 1930s type deprivation.

Unsurprisingly, the Bush administration still believes that their plan to remake the world’s strongest economy into a corporate fiefdom is a prudent way to meet the exigencies of the new century. Their foolishness defies description.

The country is now facing a Chernobyl-type meltdown and there’s nothing we can do to stop it. The foundation blocks for sound economic growth and prosperity have been replaced by a misguided faith in military adventurism and police state repression. The results are plain to see.

We are now more vulnerable to a seismic economic event than anytime since the Great Depression. The corporatists and the money-enders have absconded with the nation’s wealth; gutting the manufacturing sector, creating enormous equity bubbles, and raffling off our vital industries to foreign predators. Their unchecked avarice has left the country teetering on the verge of ruin. At the same time, the Bush administration has sown dragon's teeth across the world; leaving the US with precious few friends who will throw us a lifeline when the ship starts listing.

Hard times are on the way; only this time it’ll be detention centers instead of soup kitchens.

I disagree with this author in that I don't think there will be detention camps.

**Jim Nickerson** · November 10, 2006, 12:49 PM

Re: Bearish Information Re. Builders and Banks

Sy Harding seems to post some worthwhile opinions on decisionpoint.com each Friday, often early.

http://www.decisionpoint.com/TAC/HARDING.html

BEING STREET SMART
By Sy Harding
DOOM AMONG BUILDERS AND BANKS. Nov. 10, 2006.
One point in today's opinion is the relationship between NAHB Housing Market Index versus the SPX. Quoting a Schwab strategist; "swings in builder confidence have historically forecast stock market declines and rebounds about a year in advance." That index is down 54%, suggesting the possibility of such a drop in the SPX over the next year. Being in the investment industry, the Schwab person says, "She is not predicting a similar doomsday decline in the S&P 500."

EJ · November 10, 2006, 03:19 PM

Re: Bearish Information

Originally posted by Jim Nickerson

http://onlinejournal.com/artman/publ...cle_1411.shtml

If you need a bearish "energy bar," perhaps this is it.

I disagree with this author in that I don't think there will be detention camps.

That's comforting, Jim. Thanks.

A taste of the next and perhaps final part in the Recession 2007 series: Nothing New Under the Sun. This excerpt from Galbraith's "Money" explains why gold standard or no, inflation is a natural outcome of a political turn to nationalist interests, which vote we received earlier this week:

From Chapter 12: The Ultimate Inflation

Trying to stick to the gold standard (Page 156)

"The tendency, indeed a principle purpose, of the gold standard was to unite the economic performance and policies of nations. This, during its brief rule, it did.

"It had also a notable flaw. That was in asking, in an age of growing nationalism with a growing tendency to hold governments responsible for economic performance, that both nationalistic instinct and domestic economic management be subordinated to an impersonal, international mechanism, one capable of inflicting considerable hardship and distress. It was a flaw that supporters of gold did not accept. They saw any reluctance of governments as inhering in the lack of moral fiber of politicians�a lack that led them to try to ameliorate the strains that gold imposed. That the morality of politicians is difficult to alter in the short run was not recognized."

**Jim Nickerson** · November 11, 2006, 06:15 PM

Re: Bearish Information Re. Equity Markets Top

What are likely or possible indicators of a top in the equity markets?

Because of a bearish bias and having been "burned" more than once by entering short mutual fund positions, the question seems worth posing to attempt to obtain others' perspectives.

For the most part, if memory serves, which it may not, on iTulip there is not a lot discussed about what will be the effects of a disinflation [Ka-], inflation [-Poom] on equity markets. There is talk of a recession looming because of the believed bursting of the housing bubble, the inverted yield curve, slow-down in automobile sales, tapped out consumers with credit card and mortgage equity withdrawal debt, etc. It is my impression that these items just mentioned will lead to a down turn in the equity markets.

EJ, the illustrious founder of iTulip, on 10/18/06 in the thread Where Did Market Volatility Go? http://www.itulip.com/forums/showthread.php?t=524 noted

Originally posted by EJ

When headline index prices rise to new nominal peaks in the face extremely low volatility and high optimism, it means that the smart money is going short the smart way–quietly. I'm doing the same, starting today.

If one just looks back 7 years from where we are now at all the new highs that were occurring, any one of them could have been the the final high though they might have been "real" versus "nominal" highs; however, mid-November was then 2-3 months before the various equity highs.

Regarding "low volatility," Richard Russell (subscription required, https://ww2.dowtheoryletters.com/ ) wrote on 11/10/06, "The VIX was down .22 to 10.70, and so far the option-sellers have been right -- so far, no need for downside protection. Option sellers are always short, and when you're short you're at risk. You don't last long as an option-seller unless you're right MOST of the time.Therefore, it's axiomatic that option-writers are correct MOST of the time. When the VIX is very low, don't be short. When the VIX is very high, don't be long. The VIX is now very low."

Regarding optimism, from looking at data I keep (and these are weekly closing numbers), and for which I cannot guarantee their accuracy, in 2000 the DJI topped at 11722.98 on 1/12/00, the Nasdaq at 5048.62 on 3/10/00, and the SPX at 1527.46 on 3/24/00 ( the SPX almost reaching that level again five months later when it hit 1520.77). There is some confusion in my bulls, bears, and correction data, but I believe the following numbers were Investors Intelligence data (alternatively they are AII data). From the week ending 11/19/99 until week ending 4/28/00 there were 24 consecutive weeks when the percentage bulls was over 50%, the highest bullish % being 56.9% on 4/14/00, after the above mentioned indices had topped. That also marked the greatest Bulls minus Bears difference: 30.2%. These sentiment indicators topped out three weeks after the SPX, 13 weeks after the DJI, and five weeks after the Nasdaq topped out.

Currently Investors Intelligence bulls have been above 50% for 5 weeks, with the biggest bull minus bear difference being 26.1% this week.

My point thus far is not even to hint that EJ's assessment to begin to move "smart money" into the short side of the market is wrong. He may be as close to correct as is generally possible in having begun establishing some short positions.

I ran across the chart below http://www.safehaven.com/article-6272.htm yesterday in article by Bob Hoye. I think it is a nice chart that depicts the SPX behavior during the last yield curve inversion compared to now.

It should be recalled that the SPX held up for 23 weeks, 3/24/00 to 9/1/2000, before it really began to drop significantly, and one should note above, the yield curve inversion existed even as the SPX almost equalled its March 2000 high.

One thing I have learned at iTulip is to be more aware of the spreads between the yields of the BAA bonds and the 10 year treasury note (TNX). ( See the article by John Serrapere 6/18/06 http://www.itulip.com/forums/showthr...ight=Serrapere ) I gather the data I follow from http://research.stlouisfed.org/fred2/series/DBAA/119

I can't get my chart to post so try http://0301.netclime.net/1_5/P/R/8/b...read_11080.gif which is a chart of the BAA-TNX spread only back to 12/30/99. That chart shows that the BAA-TNX spread reached a low of 154 basis points (1.54%) at the end of Jan 2000 and then accelerated sharply until the time our income tax returns were due, corrected a bit and then continued higher until finally peaking at the markets' bottoms in Oct. 2002.

Right now (11/8/06 is the latest datum) the spread is 160 bp and the trend since 9/1/06 has been down. Until someone suggests otherwise with good arguments, I am looking for some definite reversal to occur in this spread as some sort of indication that a top could be in place in the equity markets. I am certainly open to enlightenment.

I have no deep understanding of the put-call data; nevertheless, I track the CBOE Equity and OEX (S&P 100) daily data. The put-call ratio has to drop to below 1.0 to signify any bullishness, i.e. fewer puts than calls. After a "cluster" of readings below 1.0 of six such days on the OEX out of 16 days coming off the SPX low on 7/17/06, there since have elapsed 67 trading days in which there have been only six days when the put-call ratio was less than 1.0. Of those six days four of the ratios were in the .9 to .99 range, and two were in the .60-.70 range. Whether there is anything worthwhile to be made of this, I am not sure. It seems to me that while the SPX has tacked on 115 points from 8/9/06 or about 9% there has been little in the way of bullishness demonstrated in the OEX put-call ratio. It would seem to me that before the markets top out, there should be some greater frequency and perhaps lower ratios of bullish days in this ratio (unless those involved with OEX options are too smart to become more bullish). I will be pleased for anyone to offer contrary opinion about my interpretation, or if there is in fact any value to what I am writing, then comment on it.

My impression is that even though perhaps a lot of us at least on iTulip are looking for a top, I think the markets can continue up for a while.