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Minyan Mailbag Grab Bag: Sentiment, European Bids and Market Peaks

By promises to be a most interesting earnings season as we set the year-end table.


If you consider equity call options to be the only reliable indicator of froth,
check out the ISE close. We've had three of four readings above 200 (inverted) the past couple of weeks (toggle drop down to "all equities").

I'm not so sure there are any bears left, this was the biggest wipe out job I've seen since the parabolic Feb/March 2000 move. In any case, there is not one negative comment in the general media. Anywhere. Freaky.

Anyway, I love your columns, style and actual substance.

-Minyan Marc


Thank you for sharing--and thanks for the snappage! Yes, absent the proverbial 'blow off' (remember, the last leg of "denial, migration and panic" is always the most vicious), it seems like the path of maximum frustration is a post-acne smack down. We've seen the breakout but I'm unsure if the technical types are 'all in' yet. I will offer, however, that volatility supports your observation and, if the dollar continues to rally as commodities fall, the ducks will seemingly align.

Time will tell, I suppose-it promises to be a most interesting earnings season as we set the year-end table.



I've been trading overnight futures for years. The bid from Europe starts at 1:30 AM and does not end until their market closes, if they mean business. And they were the ones that decided the SAP deal was not worth pushing ES up the other night, not the hustlers that show up in mainstream financial media. So yes, the dollar is everything to these guys and even more so if they feel Trichet is not so hawkish anymore.

Minyan Marc


Yep-Minyan Peter has been highlighting the importance of Europe in our stateside equation. I agree with him largely due to the relative (negative) gains in dollar-denominated assets foreigners have endured the last five years. That's why I felt-and feel-that the "about face" by the FOMC, while necessary, lit the fuse. The million Euro question is how long that fuse will be.



Something you might want to share with ye faithful.

A friend of mine works as a manager for a major drugstore chain doing business throughout the US.

He let me know a couple of weeks ago that they were seeing disproportionate numbers of purchase authorizations that were declined due to insufficient credit during August and September. The purchasers usually pulled out one or more cards to try, and eventually found one with remaining credit, but it suggests increasing numbers of consumers may be starting to hit the limits of their available credit.

Normally, lots of people may hit their credit limits around X-mas, due to seasonal purchases,but this is a normal, expected, phenomena. The increase in the number of refused authorizations in August/September is somewhat unprecedented.

-Minyan Jeff

Professors, some observations:

Treasury Bonds peaked in June 2003
Seventeen rate increases between 2003 and 2006

Early cycle leaders peak out:
Home builders peaked in July 2005
Utilities peaked in May 2007
Utilities relative strength peaked in March 2007
Banks peaked in February 2007
Broader financials peaked in June 2007
Relative strength of financials peaked in January 2007 (all relative strength is to S&P500)
Consumer discretionary peaked in June 2007
Relative strength of Consumer peaked in January
Transports peaked in July 2007
Transports relative strength peaked in February 2007

NYSE A/D line peaked in June 2007
New Highs peaked in February 2007

Late stage leaders are in their terminal phase and push indexes higher on declining breadth:
Oil drillers

A/D is less than 50% of what it was at high.

Speculative Bubble/Bubbles Exist:

Divergences Are Ignored:
Dow Theory tenant of Transports must confirm
Financials must confirm SP500
Semis must confirm Technology
Small caps fail to confirm

Where are we in the 4 year cycle?
Four year cycle has not bottomed.
The bull had at least three intermediate advances

Brokerage Excess
2006 bonuses

10/3 Investors Intelligence Bearish Percentage 20.4
Bullish combined reading (bulls + corrections) 79.6

Short interest has dropped 50% since peak on August 6th.

Mutual fund cash levels are at record low 3%

Future price increases have become an accepted reality.
"Economy could survive on 100 dollar oil"
"$1000.00 gold a myth no more"
"Race is on to invest in next bubble"

Margin debt has flattened or declined within 3 months of most of the stock market peaks since 1932.
There are two historical examples of the Federal Reserve slashing rates at the top of the market to prevent a panic sell off: 1929 and 2001. The reason interest rate cuts failed to encourage consumers and businesses to spend is that these periods were associated with a great deal of debt liquidation and bankruptcies. Hmm...

-Minyan David

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Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at

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