Media Appearance: Kudlow & Company (3/2/06)


This is becoming a regular gig:
Today’s show is 
Kudlow & Company, CNBC today at 5pm. We are scheduled to be on from 5:00 to 6:00 pm, plus or minus a few minutes.

Topics for discussion will include Bird Flu, Retail Sales, Real Estate,

I’m thrilled to be with Marketwatch’s
Herbert Greenberg, whom I have read for years. John Rutledge, as will Cult of the Man-Cow founder Noah

As a follow up to our discussion "Cull the herd," there are some short term technicals that are actually positive for the market. The RM column I wrote is tentatively titled "Enjoy the Rally but Cull the Herd."

Here are the positive data points:

Despite the up/down action this week, the Technicals favor an upside bias over the next month or so. There are numerous reasons for this.

Most of the major indices are above their upwards sloping 50 and 200 day moving averages: The Russell 2000, DJIA, the Dow Transports, the NYSE, The S&P400 midcaps. The notable omission is the NDX, which remains just below its downward sloping 50 day. This is the most basic of trend indications.

We also see a continually expanding margin debt – whichb is a net positive for equities short term. When this measure gets to extremes, it’s a warning sign – but we are not close to those levels yet. Studies have shown that as margin debt expands, it helps to fuel bull markets. Once the market turns south, however, it rapidly dries up, adding to the downside momentum. This remains a bullish factor, at least for now.

Sentiment is also on the side of the Bulls. Ignore the anecdotal evidence and stick with the actual data. Nearly 30% of Market advisors now read Bearish, and that tends to be the level where in Bull markets, we get rallies (its different in confirmed cyclical Bears).

Further, noted technician Stan Weinstein observed this week that Public short selling is at a very high 8.3%, while NYSE Member Short Selling measures “an unbelievably low at a reading if 40.3% (which is the lowest reading since mid-September 2001, which was registered in the immediately after the 9/11 tragedy).” That combination of the public shorting while the smart money chooses not to have historically led to market advances. And, we are still in the seasonally best period for equities.

Of course, in the rest of the column, I get into where the data is mixed and why things will likely turn negative. Bit for those of you who complain I never discuss the positives, well, there they are.


UPDATE:  March 3, 2006 9:22am

I had crossed posted this at RM, and a reader reminds me that I wrote:

"However, in tomorrow’s column (tentative title: "Enjoy the Rally but Cull the
Herd"), I note that, on the other hand, the more recent technical data is rather
positive. Here’s a preview of some of the data that explains why starting next
, I believe the market goes up . . . "  (emphasis added)

Talk about lucky timing!

Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. Michael commented on Mar 2


    Has the recent price action or economic data points changed your H1 upside targets for the market?

    At least from your latest comments, your time table still hasn’t changed (H1 top) – is that correct?

  2. theloniousspheremonk commented on Mar 2

    Werent you very bearish when the market was lower and now you are bullish with the market higher?

    isnt that supposed to be reverse barry?

  3. B commented on Mar 2

    NYSE Specialist Short Selling has been in a very steep long term downtrend and that downtrend was even during the 2000-2002 slaughter. Only going to get worse with the Archipelago merger because of program trading and electronic trading.

    The odd lot short sale situation is rather unusual at a top and that data is still relevant but not infallible. Could see them jammed if the bulls can mount a shove. Maybe if they shove hard enough, we could go alot higher as program trading kicks in past long term resistance breakouts. But, II recent sentiment survey was awful. Awful as in readings seen at major bottoms awful. Last time that happened at a multi year high? 2000.

    CRB is also on a sell signal. Could turn around short term but I really doubt it. The pattern in the CRB is a perfect blow off with a complex top formation. Ten year rates breaking out? What has held the markets up? CRB driven stocks and low ten year rates. I hope the pigs driving up oil get slaughtered. They’ve all got reasons galore why oil is going up. Uh huh.

    The equity markets do not yet speak of any type of sell signal I can see but so far the bulls can’t seem to rally even though mojo has turned up. Gold, oil and semis. What a great rally combination.

  4. Mark commented on Mar 2


    Read the Business Week article where Barry set out his 2006 prediction. He saw a very robust 1H and the market making highs.

    It pays to have your facts straight.

  5. Eclectic commented on Mar 2

    Suppose the scenario:

    Your friend brings you his son… bearing this story: The boy has been offered the opportunity to play Russian Roulette. The rules are that there’s one bullet in the 6-shot chamber. All he has to do is to spin it… hold the pistol against his head and pull the trigger. He either blows his brains out or wins a million dollars.

    Your friend wants your opinon… should his son play or not?…

    What are the odds if he plays that he may win? Very good I’d say. Is that a reason to play?

    If you suggest your friend’s son is not wise to play… but your friend disagrees, scoffs at you, and he permits his son to play anyway… and he wins…

    Could you then ever convince him he’d been foolish to let him play?

  6. todd commented on Mar 3

    the oil assholes are out of control! Oil was up today why?

    I am more and more convinced that the Yen carry trade is driving energy and gold.

    Oil should not be trading up $3 in a 24hr period when inventories are up 13% over last year. The last time oil inventories were at this level a barrel traded below $20! Think about THAT for a second.

    Anyway, with this market, how could anybody maintain a short position on energy? When energy falls (and who knows when that will be)… it will be spectacular.

  7. Idaho_Spud commented on Mar 3


    I think you better get used to $60+ oil…

    The oil inventory you’ve just described reminds me unpleasantly of a penniless alcoholic who somehow managed to stash away two extra bottles of gin in his closet.

    The macro demand hasn’t decreased (although the seasonal demand has), and too much of our oil comes from unreliable sources.

    The insecurity of our alcoholic’s gin supply is priced into each bottle, er barrel.

  8. Mark commented on Mar 3


    I think there is some psychological “anchoring” going on here as well. The longer that oil stays up at these levels, the more “normal” it seems. Let’s see what kind of high it makes this cycle. THe charts say it should be flattening, but who knows? I didn’t think it would pop over $63 either. And how about gold’s “correction”? What, 7%? ($575-535) Keep the shorts away from the local gunshops.

Posted Under