From Richard Russell:

There are nine items that I don’t like about this market (a repeat with the two new numbers 8 and 9).

(1) Far too many distribution days.
(2) The bullish percentage of stocks on the NYSE is declining.
(3) The percentage of stocks trading above their 50-day MA is declining.
(4) The Transportation Average continues to decline (even on days when the Dow is up).
(5) The Transport Average broke below a preceding decline low October 28.
(6) Sentiment is too bullish regarding the market. Nobody expects this rally to top out and fall apart. Analysts consider it impossible that the March lows will be revisited again. I don’t share their opinion.
(7) My PTI is now only 8 points above its MA and therefore very close to a sell signal.
(8) The Dow, so far, has not been able to close above the 50% level of the 2007-to-2009 decline. The 50% level was 10725.
(9) Overall volume tends to expand when the market is lower and contract when the market is higher.

Source: Dow Theory Letters


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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • jt26

    Credit risk spreads are almost back to normal (TED,LIbor-OIS,CP).
    IPOs and some M&A.
    HYG issuance a record. IG almost a record. Even REITs!
    Asset back issuance has been rising.
    Very steep yield curve.
    No G20 budgetary impasses at the global, federal or state level.

    Contrasted with Russell’s technical take. Is this confirming (i.e. with the positive back drop on credit, the markets are pausing indicating a pullback or trading range?) or a warning (ie is that the best the market can do given positive back drop on credit?)?

  • Edna Rider


    IMO, no investment thesis can be constructed using the “old” way of using fundamentals or technicals. If you observe the way the market has behaved since it seemed everything would fall apart, every major TBTF institution’s stock has been “saved” from the abyss and the rest of the market was carried higher upon the saving.

  • Rob

    All valid points, both Russell’s and jt26’s.

    But just how really bullish or bearish does that make one? What is one doing with ones investments? That tells the real story.

  • jt26

    Edna … absolutely true, … you should also add liquidity indicators as well if that doesn’t fall under the rubrik of fundamental analysis. In some sense liquidity is why “fundamental analysis” doesn’t always “work” or correlations reverse and reverse again (think stocks vs. bonds and LTCM+crowded trade).

    Rob … I’m not even sure what bullish/bearish means anymore. If it is defined as risked vs. riskless assets (IG and TBill/Bond), then I’ll fall in the neutral-bearish camp. Was “bullish” (Dec-Mar), and neutral in June after credit substantially improved, and in between selectively buying long-term trades (pharma, tech, dividend payers). I’m a bit paralyzed right now because credit can’t improve significantly anymore, so I’ll probably wait until 2010Q2 to see how the Fed plays out. On fixed income side, a little indecisive whether I should have 20% in TLT as some insurance, but otherwise duration is <4yrs and mostly IG. But if you define riskless as only gov credit, then I'm a raging bull, maybe even rabid and disoriented.