Snapshot Notes - November 9, 2006

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THURSDAY, NOVEMBER 9, 2006

PostCloseSummary

11/09/06 5:00 PM EST

Yesterday and this morning I wrote about the Down Pressure indicator that we keep for the Nasdaq 100, as it had reached a truly extreme reading that has been consistent in coinciding with a peak in momentum - even during the strong uptrend of the past few months.

That reading, among other indications that buyers seem exhausted, had me wanting to short the NDX if it reversed the early Cisco-induced strength and dropped below 1750. It challenged that level a few times during the day but finally broke decisively during the afternoon and is now resting in an area even more traders have as a focus - 1740. Should it break and hold below there, I plan on becoming more aggressive with short positions.

Our short-term guides haven't really reflected any excessive selling pressure or pessimism with today's decline, and remain mostly mixed. Given the price rejection from the highs, and what we went over yesterday and this morning, it seems like there should be more to come on the downside and like I noted, I plan on becoming more aggressive with that bet should 1740 fall.

My apologies for the lack of updates this afternoon - my mother-in-law fell and broke her hip, and we had to do some scrambling to get her set.

Have a great night and we'll see you tomorrow!

MidMorningOutlook

11/09/06 10:25 AM EST

Good Thursday morning...On Tuesday I wrote about the lowrisk.com sentiment survey, and how it demonstrated that traders were apparently willing to switch from bullish to bearish at the flip of a hat. I was wondering if that kind of attitude would show up in some of the other surveys this week.

The other "noisy" survey that focuses on individual investors, from AAII, was released this morning. This isn't comparable to the lowrisk.com poll because that one closed on Sunday evening, while the AAII survey closed Wednesday evening - meaning investors had a chance to see the rally early this week before voting.

They seem to have taken that to heart, as the AAII Bull Ratio jumped to 65% (meaning that of those that expressed a definite opinion, 65% believed the market will be higher six months from now). That is the third most-bullish reading this year, behind April 5th and May 10th - neither of which was a particularly good time to follow along with the AAII folks, at least right away.

Historically, the 65% bull ratio isn't all that high - we'd need to see something north of 75% or so to get concerned about an imminent decline. But considering the other readings this year, it's at least something to note.

Yesterday I showed a chart of the Down Pressure indicator for the Nasdaq 100. It has entered truly extreme territory, which shows that those stocks may have hit a peak in momentum. Just looking at the other readings since the July low, any further short-term upside over the next few days (if there was any), was given back shortly. This is in the context of what appears to be a larger time-frame decline in momentum.

I noted that I would be interested in a short if the NDX backed off from this morning's optimistic opening and fell (and held) below 1750. That's still what I'm focused on this morning, and I would look to press harder if 1740ish fell by the wayside too. I'm not interested in trying to hold on to or initiate short positions if the major indices (particularly the S&P and NDX) move to new highs, and I'm not a good breakout trader either, so I'll be left behind on the long side if we break out and rally today - I think the chances of a failed breakout are too high to try to chase.

Note: There will be no "Lunchtime Lull" or "Approaching the Bell" notes today, but the rest of the updates after those should be approximately on time.

All the best,

Jason Goepfert

President and CEO

Sundial Capital Research, Inc.

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