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ON THE MARKET >The Planet of Peril*

May 02, 2011 9:26 AM ET
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Seeking Alpha Analyst Since 2010

Dr. John L. Faessel is a seasoned and respected Wall Street professional with industry-wide recognition for expertise in market strategy and analysis. He is widely recognized for his insights in public companies. For over 25-years Dr. Faessel’s ON THE MARKET reports have been widely distributed to a throughout the world to an extensive list of financial institutions, investment banking firms, brokers, foundations, mutual funds, hedge funds and private high net worth investors. 

Monday 5-2-2011


Dr. John L. Faessel


Commentary and Insights


     Quote of the day

“With firm reliance on divine providence,

we mutually pledge to each other our lives,

our fortunes & our sacred honor….”


From the Declaration of Independence



To receive my Best Ideas for 2011 send request: Dr.Faessel@onthemar.com


Bin Laden Shot Dead - the world is a better place


Romans 13: 4 (NIV) [Government] is God's servant to do you good. But if you do wrong, be afraid, for he does not bear the sword for nothing. He is God's servant, an agent of wrath to bring punishment on the wrongdoer.


The Planet of Peril*

Emperor Ming the Merciless versus Flash Gordon


Stock Markets in Major Technical Breakout


Dow Jones Industrials, Dow Transports and the Dow Jones Utility Average simultaneously reach new recovery highs; Strong medicine!


Dow Transports, S&P Mid-cap and Russell 2000 at ALL TIME HIGHS


Bullish Market Sentiment comes off 7-week lows


Silver futures are off 12.1`% in early trade...


Last week the US stock markets blew thru important technical resistance, the highlight being the new all time highs in the Dow Jones Transports.

The fact that the Dow Industrials, the Dow Transports and the Dow Utilities ticked cycle highs crystallizes the recent and amazing unrelenting power of the stock market at this time. This last move off the S&P downgrade of the USA debt has been nothing short of spectacular. The price action has been stunning with buyers stacked below the bid during this run.


* That all said, the world “situation” looks like something out of The Planet of Peril and Flash Gordon and his continuing encounters with Emperor Ming the Merciless in the hit sci-fi adventure serial that was played and replayed in theaters back in the 40’s and 50’s. Evil Ming seemingly through some Machiavellian megalomania using unimaginable science could control the Earth's weather, create tidal waves and earthquakes, control monsters of the deep, send meteors to bombard the earth and create general global mayhem all created out of  one of his in his infernal mechanisms. Back then it was pretty scary. But never fear Flash would always right the world's bedlam and save the universe while fending off a couple of hot babes who were chasing his muscular bod. Flash was played by Buster Crabbe, an Olympic medalist and USC All-American swimmer. (I met Mr. Crabbe in the mid-50s at a USC event and remember joking with him about the evil Ming the Merciless.)


The Flash Gordon series was the first-ever science fiction 13 installment serial that played in the movie theaters of the day. By the way, Buster Crabbe was about as good looking a guy as anybody that ever came down the pipe. He also played Tarzan...


Anyway, with today's earthly upheavals sprinkled with a "no way out" global debt crisis, currencies in upheaval, precious and industrial metals running amok and "not going away" inflation becoming a huge concern watching the markets roar makes for a challenging conundrum of sorts. Where I live in La Jolla / San Diego it's hard not to be reminded about the mess especially when you're driving because of the potholes that are everywhere. The local crummy political class has bankrupted the city and now you drive with one eye on the traffic and the other eye trying to avoid the pot holes, so you're always weaving around the holes in the street. So, much of the traffic is now weaving all over the street all the time; it's enough to drive you to drink or worse. Our country has gone whacko! And our leadership? Good grief!


Another epic quote that's applicable here:


"We must take things as they are and profit on the folly of the world"

Anselm Solomon von Rothschild


In any event, the good news continues as far as earnings go in the S&P 500. Analysts have raised their profit estimates on over 15% of the index and economists are pointing to 3% growth in the GDP.


Premarket futures are up a nice chunk on Bin Laden's killing. The McClellan Oscillator is at the higher reaches of neutral, with put / call volume ratio’s still subdued, sentiment just off seven week lows and with a major technical breakout behind us we should fire higher into the "overbought". There's a feel-good backdrop that will fire up momentum as more shorts will close out their positions. Should be an interesting day. Hallelujah!


But oops; $6 billion was pulled from US mutual funds over the last two months.


Short term price support in the in the S&P 500 (SPX) is at 1340. Two weeks ago Monday's (S&P downgrade) low and support is at (SPX) 1249.05. The 50-day moving average support in the S&P 500 (SPX) is at 1317 and 200-day moving average support is 1219.


Short-term resistance in the S&P 500 (SPX) is at 1364.50. The next resistance level that goes back to May 2008 is at 1440. An all-time high in the S&P 500 (SPX) is 1576.


Tracking the Bond Markets $ 91 Trillion

The BARRON’s Confidence Index ** last week came in at 79.4. Eleven weeks ago it posted new cycle highs of 83.7. The recent high numbers “at or near” the 80’s are at levels not seen since the fall of 2007. When you consider the news backdrop of the last few months this is pretty remarkable.


Friday’s key indicators and metrics:


Cycle highs or lows indicated in RED


·                       Friday’s McClellan Oscillator is Neutral @ plus 140

·                       Friday’s Gold (COMEX) $1503.2

·                       Crude oil (NYMEX) $113.93

·                       The Treasury 10-year yield 3.29

·                       3-month $ LIBOR at 0.274

·                       CBOE Put / Call Volume Ratio – 0.93

·                       Euro – 1.482

·                       VIX – 14.75

·                       US Dollar Index – 73.11

·                       Canadian Dollar – 1.0562

·                       Copper – 4.165

·                       Aussie Dollar – 1.0913




Consensus Bullish Investor Sentiment had been generally on the decline for several weeks. Bearing in mind that the major market indexes are AT - or above - cycle highs and in some cases ABOVE ALLTIME HIGHS the overview suggests that more "bullishness" can be generated before the sell alarm rings.


(High BULLISH readings in the Investor Sentiment Readings usually are signs of Market tops; low ones, market bottoms.)

·       The American Association of Individual Investors [AAII] Investor Sentiment Survey of BULLISHNESS rose 37.9% from the recent low of 32.2% established last week. In January it ticked new cycle highs of 63.3%. The low of the May 2010 selloff was at 30.1% [The lows registered on March 9th 2009 were an historic low posting of only 18.9% BULLISH.]

·       The AAII Investor Survey of BEARISH sentiment was 30.7%. Last week it was 31%. It posted 28.9% three weeks ago. February lows were 25.6%. January’s BEARISH sentiment lows were at 16.4% and that was lows not seen since 2005. The highest Bearishness occurred 6 months ago when it ticked the summer “market retreat” high at 57.1%. Item of note: In August 1987 it ticked the lowest low ever recorded at 6% BEARISH – Remember what happened on October 19, 1987...


·        Consensus Index BULLISH investor sentiment was 68% up from the 64% posting of last week. Four weeks ago it was 71%. The recovery cycle high at 76% was established 8-weeks ago. The multi-year highs in Bullish sentiment of 76% were first reached in the first week of May 2007 just prior to the massive down-leg.


·        The Market Vane (Market Letter Survey) readings ticked up significantly to 65% from the 57% that was registered last week. The survey posted new cycle highs at 68% 11-weeks ago. Market Letter writers had backed off the levels of the Bullishness seen in late 2007 when the Market Vane routinely registered above 70%.


·       The Citygroup “Panic / Euphoria” Model jumped to a cycle high at a plus 0.38, still in the neutral zone but, DANGEROUSLY CLOSE TO EUPHORIA. The model moved from panic into neutral in October 2010. Friday’s posting, while still “barely” in the “neutral” zone at 0.38 is the highest in since the 0.6 Euphoria postings in May 2008. During the dot-com bubble highs of December 1999 the model posted ALL-TIME highs of La-La-Land euphoria at 1.70.


** The Confidence Index is the premier measure of how the bond markets trillions (total global is around $91 trillion and USA is 39% of that) are allocated: (The bond market is twice the size of the stock market.) The ability of this key indicator of market health to post near new highs bodes well for the economic recovery and for stocks to continue forward. One year ago the index was 76.1.


For my Best Ideas for 2011 please send an e-mail request to: Dr.Faessel@onthemar.com




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