imported post
hehe...I am being a little facetous...What I am saying is that the IRS expects me to live to 83. I am thinking 60 max, but an anyeurism is likely in my late fifties. :s My point is differing time horizons.
[line]
Reverse Psychology Rules Stocks
BY JONAH KERI
INVESTOR'S BUSINESS DAILY
No good luck charm will help you for very long in the market. To succeed at investing, rely on
objective analysis. That means looking at
price and volume cues from the major indexes and individual stocks.
The market also offers a slew of secondary measures, which can help you assess the investing landscape.
When used correctly, these psychological indicators usually are contrarian gauges. In other words, when they move one way, the market often moves the other.
To find these indicators, go to IBD's General Markets & Sectors page, B2 in the print edition. Here's a quick rundown:
• Nasdaq volume vs. NYSE volume:
Nasdaq stocks now garner a lot more daily volume than their NYSE counterparts. Former big names like Cisco (CSCO) and Intel (INTC) may no longer be market leaders. But big-money investors still trade a huge number of shares daily.
There's no hard and fast rule for measuring the volume ratio between Nasdaq and NYSE stocks. But in general,
when NYSE volume approaches or exceeds Nasdaq volume, you may be near a market bottom. When Nasdaq volume jumps while NYSE trade stays tame, you may be looking at a market top. The five-year low occurred a month before the market took off in October 1998. The indicator flashed a one-year low on Sept. 17, four days before the market hit bottom last fall.
[align=center]
[/align]
• Public/NYSE specialist short sales:
Excessive shorting often foreshadows a market bottom. When the public starts selling loads of borrowed shares (in hopes they'll drop lower) relative to shorts by NYSE specialists, you're near the end of the decline. Why? The crowd is always wrong.
The public is expressed as the numerator, specialists as the denominator. So this contrarian gauge shoots up when individual investors are sure the market can only go lower. The ratio hit a five-year high in September 1998, a month before the market launched into a roaring new bull. The highest level in the past year? The ratio hit 1.5 on Sept. 21, the exact bottom after the terrorist attacks.
• Put/call premium ratio: A cousin of the put/call volume ratio, this gauge compares the premiums paid on all puts vs. calls. The calculation is more complex than the put/call volume ratio. But like other contrarian indicators, we often see this ratio hit extreme levels near a market turn. It spiked to a five-year high three months before the market sold off in late 1997. It hit a five-year low six weeks before the 1998 bull.
•
NYSE short interest ratio: This gauge measures the total number of shares being shorted vs. the NYSE's average daily volume. A value of 4 means four days' worth of short interest.
The bigger the number, the more shares traders are shorting as they turn bearish. Also, the bigger the number, the more buying it takes traders to cover those short positions in the event of a rally.
As the ratio starts to spike up, a new bull market may soon arrive.