possible ST buying climax but longer term wall of worry well in tact

I've been a bit busy these past couple days with wedding stuff. My day of capituation is September 13th.

I've mentioned time and time again how investors are quickly to go from bullish to bearish on just marginal downside but do the opposite you need to see a rip roaring rally and then only, kicking and screaming do investors turn bullish in a big way.

Once again Rydex traders are getting badly whipsawed and very, very quick to hide in money market funds on only marginal downside. Once again the level in MM funds has spiked up indicating signficant fear. But notice the erratic behavior lately. These poor saps have been getting whispawed very badly chasing short term rallies and then stampeding out on ST declines only to see the market rally again. The current level of MM funds is good for the bulls here longer term although the fickleness of these jokers can be quite extreme and so we can see them do a 180 at any time. Never have I seen such erratic behavior by these guys wherby practially every single ST move they have made lately has been DEAD WRONG! A ST spike in MM funds coincided with a ST bottom and a ST collapse coincided with a ST top. Picture a dog chasing his own tail.





Next you have AAII sentiment which has shown a huge reversal on just a 2% drop which now has been recovered completely. Last week about 51% were bullish 32% bearish. This week 34% are bullish 40% bearish. What a massive flip in sentiment and for what? A 2% drop? If that doesn't scream wall of worry I don't know what does. Since March investors have been acting like frightened turtles at just the first hint of downside.


The memories of the collapse are still so fresh and so investors take a 2% downside as a warning that the big bad bear lurks around the corner. Contrast this sentiment with all those beaten to a pulp bears out there who were thumping their chests like mad gorrillas when the market had that 2% drop Monday. And since then what has the market done?.....made fools of as many men as possible.


Having said all this....the market may have reached a ST buying climax here and so the bears could get some relief again. Another move of about 1% up tommorow would render a maximum ST buying climax reading which would practially gurentee a good whack down Monday or Tuesday...that's probably not going to happen methinks but I'll respect the market action and if it looks like it wants to go higher I'm not going to argue with it. My gut though tells me the market goes down starting tommorow. The NASDAQ/NYSE volume ratio today hit 2.02 which also suggest the bears could get some play very soon. But based upon all I've said, the consolidation thesis I have remains valid, Tommorow morning I'll discuss a put option play I'm considering.