Opening Whisper

I don't think the Nasdaq 100 (NDX) has been this flat for 3 weeks in a row since December 2004. It seems that the Christmas rally may be over. For some reason this song came to my mind as I am watching the markets tread water today, and ever since the first of December.

Where have all the flowers gone?
Long time passing
Where have all the flowers gone?
Long time ago
Where have all the flowers gone?
Girls have picked them every one
When will they ever learn? When will they ever learn?.....

Listen here: http://www.niehs.nih.gov/kids/lyrics/flowrsgone.htm
One of Peter, Paul and Mary's famous songs. Words and music by Pete Seeger.

Where have all the buyers gone? For that matter, where have all the sellers gone? What "kind" of resistance are we seeing here? I don't think that the resistance is from the index price levels themselves. Certainly the Dow Industrials should not be inhibited just because of the big round 11,000 number. There must be something else troubling this market. But what? Earnings going forward? Mutual fund flows? Interest rates? Debt?

We are trend followers and not trend predictors. We can't buy and sell the news. We can only profit from price movement. And right now it's NOT MOVING! We will likely see a move soon to break out of the flat channel that the Nasdaq 100 is in currently.

Many of our subscribers have told me that they are in cash waiting for the next move. That's not a bad idea. We may see a little more buying before year end. My only hesitation to the buy side is that any break to the upside may be a false breakout. If they ring the Dow 11,000 bell on or before December 30 th, that bell may signal the top. The selling may then begin in earnest in the early days of January. Why should Dow 11,000 be the bell ringer? No reason at all other than this market is acting very flakey and without conviction. A deja-vu Christmas rally and selling into January?

"When will they ever learn? When will they ever learn?"

What Is The Current Market Sentiment?

The market has no new trend other than the bullish trend from mid-October. Sentiment has clearly moved to the extreme bullish side. Investors' Intelligence bullish - bearish divergence has not been at this bullish extreme since the first week in August and that extreme was a sell signal.

The CBOE Total Put/Call Ratio weekly chart below is confirming a short-term top.

2 Year Weekly - CBOE Total Put/Call Ratio ($CPC)

The November 2005 low in the CPC (bearish) has been fighting the seasonal year-end rally. It's kind of like sending Christmas cards to friends. In most cases, it's just expected. So the November/December rally happens just because it's expected. But some expectations can end badly as they did in January 2005.

Both VIX and CPC are closer to bullish sell signal extremes than they are to bearish buy signal extremes (in a contrarian view).

The weekly VIX chart below shows just how quickly bullishness has accelerated into options since mid-October. You don't have to guess or predict to believe that these low VIX readings are usually the signal to sell the markets.

2 Year Weekly - VIX Volatility Ratio ($VIX)

Our Trading System - What The Numbers Are Telling Us
{The Listener Trading System Model and signals are only available to subscribers.}

The markets played out almost exactly like last year during the 3 rd Friday of December when the NDX was down on the day. NDX was down 0.77% on the day and down 0.23% on the week. SPX was up 0.63% on the week.

If the analogy to last year holds, then the final nine trading sessions of the year will be characterized by rising prices on dramatically lower volume. Placing a bullish bet at this point might be in accordance with the trend since mid-October, but it would have a lot of risk should the low-volume day/swing-traders decide to exit early. The long side does not appear to have much value at this point.

6 Month Daily Nasdaq Summation Index

The Nasdaq Summation Index ($NASI) has been a good indicator signal for the NDX. If you pull up a $NASI chart of December 2004, you will see that it dipped to signal an early exit before the January 2005 sell-off. We are possibly seeing similar action in the NASI chart above.

Trend Compliance: The NDX market looks to be making a slow-motion roll-over. This sure does feel like December 2004 all over again.

1 Year - NDX ZigZag (5%)

The Markets Are Whispering - Are You Listening?

Recent Signal	Slo. Stoch. (fast)	StochRSI (fast)	CCI (fast)	MACD (Variable)	Trigger Inputs Proprietary or Other	ML Signal 3
---	---	---	Recent	Signals	Not	Shown
Oct 31, 2005	Buy	Buy	Buy	Sell	Cash Stop	Cash
Oct 28, 2005	Sell	Sell	-	Sell		Sell
Oct 19, 2005	Sell	Buy	-	Sell	Cash Stop	Cash
Oct 05, 2005	Sell	Sell	Sell	Sell		Sell (100%)
Sep 30, 2005	Sell	Buy	-	Sell		Sell (50%)
Sep 15, 2005	Sell	Sell	-	Buy		Sell
Sep 14, 2005	Sell	Sell	-	Buy	Cash Stop	Cash
Sep 07, 2005	Buy	Buy	Sell	Buy (mod.)		Buy
Sep 06, 2005	Buy	Buy	Sell	Neutral	Cash Stop	Cash
Aug 08, 2005	Buy-	Buy	Buy	Buy		Sell
Aug 04, 2005	Buy	Buy	Buy	Buy	Cash Stop	Cash
July 08, 2005	Sell	Buy	Buy	Buy		Buy
June 24, 2005	Sell	Sell	Sell	Buy-	Cash Stop	Cash
May 13, 2005	Buy	Buy	Buy	Sell++		Buy
May 06, 2005	Buy	Buy	Buy	Sell+	Cash Stop	Cash
Feb 11, 2005	Sell	Sell	Sell	Sell		Sell
Feb 04, 2005	Sell	Cash	Sell	Sell	Cash Stop	Cash
Jan 14, 2005	Sell	Sell	Sell	Buy		Sell
Dec 31, 2004	Buy	Buy	Buy	Sell	Proprietary	Cash
Oct 15, 2004	Buy	Buy	Sell	Buy		Buy
Oct 08, 2004	Buy	Buy	Buy	Buy	Cash Stop	Cash
Oct 01, 2004	Buy	Buy	Buy	Buy		Buy
Sep 24, 2004	Buy	Buy	Buy	Buy	Cash Stop	Cash
Aug 20, 2004	Sell	Buy	Buy	Sell+		Buy
Jul 16, 2004	Sell	Sell	Sell	Sell		Sell
Jul 02, 2004	Buy	Sell	Buy	Buy	Cash Stop	Cash
May 14, 2004	Sell	Sell	Sell	Sell	Proprietary	Buy
Apr 30, 2004	Sell	Sell	Sell	Sell	Cash Stop	Cash

Listen To What He Says

KJV Luke 2:7-14 And she brought forth her firstborn son, and wrapped him in swaddling clothes, and laid him in a manger; because there was no room for them in the inn. And there were in the same country shepherds abiding in the field, keeping watch over their flock by night. And, lo, the angel of the Lord came upon them, and the glory of the Lord shone round about them: and they were sore afraid. And the angel said unto them, Fear not: for, behold, I bring you good tidings of great joy, which shall be to all people.

For unto you is born this day in the city of David a Saviour, which is Christ the Lord. And this shall be a sign unto you; Ye shall find the babe wrapped in swaddling clothes, lying in a manger.

And suddenly there was with the angel a multitude of the heavenly host praising God, and saying, Glory to God in the highest, and on earth peace, good will toward men.

I am working on the art of listening and hope that you are also.

Best Profits,