Friday, December 30, 2005

Clear the Deck!

Easy-Pleasey, Muck!


Clear the deck!  At least that's what folks seem to be doing in an attempt to avoid the "anticipated" January selling.  We're now about to have 4 weeks down in a row on the Nasdaq, as "January comes early."  Remember last January, the SP500 fell about 2% the first two trading days.  Most traders have the mentality that whatever has most recently happened, will continue to happen or will happen again.  This generally doesn't work, because once the crowd thinks they know the pattern, the pattern doesn't work again.  And we saw that this week with the Santa Claus rally everyone was expecting.  Maybe that happened in November, as folks were trying to get in before it happened.

The bears are loud and vocal, convinced that the Recession is Nigh.  You've heard their cries:  Bush sucks!  Worst econony since Hoover!  Rich are getting richer while the rest of us are in soup lines!  Of course, the bears think everyone is bullish.  But they're watching Bubblevision, where everyone is bullish 24x7x365.  I think you have to discount the permabulls and the permabears.

A few things I've noticed this morning:

  • Mark Hulbert notes that most newsletter writers are bullish on 2006, which could be a contrarian sign. 

  • The Equity-only put-call ratio is showing rising fear in the market, as we saw in October 2005.  I think this could lead to a quick rally, as we're getting quite oversold.

  • The Nasdaq is sitting at the 50dma, and plunged below it this morning.  It could bounce.

More later.  First bowl game kicking off!  I've got Minnesota -3!

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