ajtj99's Market Pulse

[Justa Werkenstiff]

Market: I like following the OEX traders as non-contrarians. And for whatever reason, these guys are not bearish.

The 10 day OEX P/C is in bullish territory. These guys have yet to start fading this move as they have done with almost all intermediate tops. They faded the intermediate tops of early 2004 and December 2004 but they have not positioned themselves here yet for a market decline.

In fact, they have been doing the opposite. They have been positioning themselves with calls. I follow the Oex open interest ratio and this is now at an extreme bullish point. How bullish? It is two standard deviations off the mean which has only happened three times since the beginning of 2003. And all of those times were at major market bottoms. These guys were bearishly positioned around the November market peak this year. The action since then has been sideways but in the midst of this action these guys have gone bullish to an extreme.

This can change pretty quickly but for now that where it stands.

On the other hand, the NDX seems to have issues as discussed previously.

Guideline: If one is bearish, short the NDX; if one is bullish, buy the broader market like the SPX.

The action yesterday was normal slop-up rally phase action. I thought the SPX would hold more of yesterday's gains. So I looked around to see if it was a concern. And what I wanted to see was on the WLSH, RUT, and NYA...full bodied daily candles with or without upper shadows. And so my GUESS is we fill those upper shadows over the next two days during the course of this meandering rally. But the exact nature of this rally is hard for me to envision because of its nature to meander in an upward direction. Moreover, the daily candles on the NDX and COMPQ look like bear flags forming for now. Maybe they can fix that look but it should be watched.