S&P 500 & Nasdaq Analysis and Trends

[frenchee]

10 Reasons to be a Short-Term Bear

1. Past selling pattern developing on Nasdaq.

http://www.investorshub.com/boards/read_ms...sage_id=3980993

2. NAMO in nose bleed area.

http://stockcharts.com/def/servlet/SC.web?c=$NAMO,uu[w,a]dhlaynay[dc][pd20,2!a-55!a30!f][iut]&pr...

3. Insider selling picking up.

http://insider.thomsonfn.com/tfn/tearsheet...nHeader=insider

4. Big boys selling short while small specs long on S&P 500.

http://www.vtoreport.com/sentiment/cot.htm

5. Fund buying continues to slow.

By John Spence
Last Updated: 9/2/2004 6:45:00 PM

BOSTON (CBS.MW) -- Investors committed a net $700 million to stock mutual-funds in the five trading days ending Sept. 2, slightly less than the $900 million reported in the previous week, research firm TrimTabs said Thursday.
Buying interest is slower than at any time in the last decade, TrimTabs noted.

"They sold in May and went away," said Carl Wittnebert, director of research at TrimTabs. "Except for the bear market years of 2001 and 2002, the May-August period had the lowest equity inflows since 1992."

The closely watched figures, a measure of bullishness in stock and bond funds, showed domestic stock funds collected $800 million in new cash for the second week in a row.

Meanwhile, investors pulled $100 million from funds that hold international stocks, reversing inflows of $100 million the prior week.

Bond funds had outflows of $500 million, continuing last week's exodus of $900 million from these offerings. Hybrid funds, which invest in both stocks and bonds, experienced inflows of $900 million, following up on an inflow of $500 million the week before.

6. Economic Cycle Peaking.

September 02, 2004


The persistence of the economic soft spot we discussed in Tuesday’s comment was confirmed even further in the last two days. Despite desperate incentive offers, August auto sales dropped to an annualized rate of 16.6 million units from 17.2 in July, and General Motors and Ford announced significant manufacturing cutbacks to pare excess inventories. August chain store sales were up only 1.1 percent, the weakest showing in 17 months, while Wal-Mart sales came in at the low end of a range that they only recently downgraded. The economy.com Risk of Recession index climbed to 32.7 in August from 25.7 in July and only 7.6 as recently as May. Economy.com says that, as a rule of thumb, a reading of 40 or higher for three consecutive months indicates the probability of recession within six months. We note, however, that the current level is about where it was in early 2000.



In addition, after today’s close, Intel sharply slashed its third quarter revenue range to $8.3-to-8.6 billion from a previous $8.6-to-9.2 billion, a 5 percent reduction in the mid-point of the range. They also reduced their projected gross margin for the quarter to 58 percent from 60, blaming slack demand in computer microprocessors and communications chips as customers were attempting to reduce bloated inventories. Intel’s downgrading of its outlook was far greater than the reduction expected by the Street, although the handwriting was already on the wall as a result of previous comments by managements at leading technology companies.



So now we have excessive inventories in both autos and technology following a second quarter GDP that showed meager growth in final sales and higher inventories. Does anyone see a pattern here? Knowing what we already know about the extremely low consumer savings rate, excessive consumer debt, a poor employment picture and a huge trade imbalance, we think it’s time to stop thinking about the current economy as being in a soft spot, and time to start thinking that this cycle is already peaking at a time when the monetary and fiscal authorities can do very little about it. This remains so no matter what tomorrow’s payroll employment number looks like. We pointed out in our June 28 comment that the economy was 9.4 million jobs short of where it should be if this were an average post-war cycle, and nothing that is reported tomorrow can put more than a minor dent in this number. Just to keep pace with past economic expansions we needed an average of increase of 323,000 per month, and only two months have exceeded 300,000. Even if we get a third one tomorrow, the difference is negligible.



The market rally of the past three weeks doesn’t disrupt the pattern of lower highs and lower lows that has been in existence since March. Successive rallies have peaked on the S&P 500 at 1163, 1150 and 1146, while lows have bottomed at 1087, 1076 and 1062. The current rally is apparently expressing relief over lower oil prices, the defusing of a crisis in Iraq, and the absence of a terrorist incident during the Republican convention. In our view the market remains highly vulnerable, and the rally is likely to peter out when strategists and economists are forced to mark down their overly optimistic economic and earnings projections.

7. Economy rolling over.

http://www.#########.com/dollarbear2k3/ISM.html

8. The chips are down.

The semiconductor industry is expected to expand current production capacity 13% in 2005. But semiconductor unit sales, Goldman estimates, will rise only 7% in 2005. (And revenues will go up by less than that, given expected price declines.) The inevitable conclusion, Covello says, is that capacity-utilization rates in chip making are headed south. The decline is already under way, he adds, but will likely worsen in the next few quarters. Now running a little north of 90%, Covello figures capacity utilization will drop to the mid-to-high 80s. And when that kind of thing happens, orders for semiconductor manufacturing and test equipment inevitably go south.

9. Market probabilities point south.

http://www.gold-eagle.com/editorials_04/mchugh090404.html

10. We are over a barrel.

http://www.safehaven.com/article-1920.htm