Overview
This week's data included a new twelve year high for the advisors projecting a correction, along with lower readings for both the bulls and the bears. As things stand, the indexes continue to flirt with 2009 highs. Pullbacks last week was brief and followed quickly by new buying. However, we have noted a narrowing of the participation. Fewer industry sectors are rallying and the measures of individual stock activity are slowing substantially from the initial index highs attained in the summer.

The bulls were down slightly to 50.0% after last week's 50.6% reading, which equaled their September high. Both are still up nicely from the start of November, when a market pullback saw their number drop to 44.4%. The advisors continue to show a major sentiment shift from a year ago when the bulls were just 22.2%. That was almost a twenty-year low going back to 15-Nov-88 when the bulls were 21.1%.

We continue to see fewer and fewer bears. They were just 16.7%, down from 17.6% the previous week and 26.7% the first week of November. That is the least bears since 13-Jun-03 when we counted them at 16.1%. Again we note a major shift over the last year from 54.4% in Oct-08.

Advisors classified as correction rose to 33.3% from 31.8% a week ago. This group is mostly bullish but they look for an intervening market retreat before they will commit new funds. They look to buy on dips. Advisors often shift from bearish to correction before they are ready to make a bullish commitment and vice versa. This is the highest reading since 5-Sep-97 when they were 33.9%.

The long-term bears are at their lowest level in over six years, while the short-term bears (those for a correction) are at their highest level in over twelve years - a very unusual pattern. The bulls are also well below where they were at the market peak in October 2007. This signifies there are not a lot of raging bulls out there. But there are also many advisors who would like to become bulls if the market pulls back. As the markets often confounds expectations, we could see a year-end rally to new highs that could force the correction camp to capitulate and buy on strength. That, we think, could mark the top.

The difference between the bulls and bears was 33.3%, up just 0.3% from last week and another bearish reading. That last time we had such a large negative difference was in late 2007, just after the all-time high in the DJIA, pushing the spread over 40%.

Bullish Themes

“Daily Commentaries:

Nov-19: I was happy with my numbers because they saw the decline to be net bullish. Once again the bears will have to wait. It's not going their way.
Nov-20: My bullish numbers abound. Here we saw 5 OBV 'higher downs' but only 1 OBV 'lower down'.
Nov-23: Technically stocks are rising because they are following their technical signals which are bullish. The bears have no legitimate bearish signals.
Nov-24: Seem to be right on the verge of a huge year-end run-up of several hundred points.” (25-Nov-09):

Joseph A. Granville's The Granville Market Letter, PO Drawer 413006, Kansas City, MO 64141 (800-876-5388)


Correction/Bearish Themes

[Correction Theme] “Market Summary:
1. Hints of quality spreads deteriorating suggest a counter-cyclical equity correction.
2. Bond Barometer is only one component from a bearish signal. Inflation Barometer
rises to 90%. Despite that, a final short-term bear market rally is likely.
3. The Dollar frustrates bull and bear alike. We're sill waiting for a resolution.
4. Gold is getting frothy but no technical signs of a peak, except the shares fail to confirm
the new gold high.
5. The Chinese (FXI) and Russian (RSX) ETF's violate their bull market trendlines for relative
action against the World Index.
6. Japan's ETF (EWJ) relative line is at a multiple year low. Is a crisis developing as a prelude
to the end of the 21-year Japanese secular bear market?” (December 2009)

Martin Pring's InterMarket Review,4830 Sweetmeadow Cr, Sarasota FL 34238 www.pring.com

[Bearish Theme]

“Trading over the latest two months shows a notable loss in upside price momentum and increasing deterioration in market breadth and volume indicators. In contrast to the indices weighted by large US multinationals that benefit from the weakness in the U$, the broadly based indices such as the NYSE Composite and the Russell 200 failed to make new higher highs last week.

Our last issue featured a chart showing the bearish divergence of NYSE Upside/Downside Line from the NYSE Composite. The same divergence has developed in trading on the NASDAQ. The NASDAQ Composite, until recently among the top performing indices, also shows deterioration in price momentum since the index made the intermediate mid-September highs. That is, when the 14-day RSI last matched the high in the index.

Last week the new highs in the large cap indices such as the DJI and the S&P 500 failed to be confirmed by the NYSE A/D Line, an indicator that until mid-October, has the led the NYSE price indices. Another non-confirmation of last week's new highs in the price indices was a shrinking in the number of stocks hitting new highs.” (December 2009)