As “Papa Bear”, Bill O’Reilly might say if he were in my shoes, “F**king thing sucks! WE’LL DO IT LIVE!”

I’m frustrated, not just because I’ve been a loyal Firefox fan and supporter for a long time but also because I bought into the hype and downloaded the new version to help Mozilla set a new world record.

I just can’t believe an organization that has put out such high quality software in the past can jump the shark this badly. How many months was this in beta again? how many release candidates did we go through?

Here are the problems I’m having:

• pages won’t load!
• when they do, CSS is randomly missing
• if they do render, pages are very slow (my cursor stutters rather than glides across the page)
• the “awsome bar” is about as useful and interesting as Jar Jar Binks
• too many add-ons are not compatible

I headed over to the support forums and this is the page Firefox 3 presented me with (I kid you not):

And here is what google analytics looks like for me (click to enlarge):

I tried erasing the cache, cookies, etc. then restarting Firefox but no matter what I do, that is what Google Analytics looks like. I’ve heard from others that they can’t see Google Maps and others that MySpace (one of the most popular sites on the web) doesn’t render correctly.

Anyone else out there have problems with Firefox 3 or is it just me?

Oh and in case you’re wondering, I’m typing this from Opera (9.50).

A slightly better use of a quant jock’s talents would be to find correlating stocks. But what do I know?

For more, check out alexcartoon.com.

While we quibble about a percentage point here and there to see if our market decline fits into the classic definition of a bear market, there are no qualms regarding that in China.

Support?
The scary thing is that even after falling so much, the index is still far from major support areas. If you look at the link above, you’ll see a long term chart of the Shanghai composite going back to its founding. According to that chart, significant support is somewhere in the vicinity of the 2000 level. That would put a potential fall to almost 70%!

I have no idea if that will happen but the Chinese stock market certainly has precedent. It is not for the faint of heart. The Shanghai Composite can go ballistic: rising as it going ten fold in the span of a year (1991-1992) but it can also lapse into deep stagnation, as it did from 2000 to 2007, treading sideways.

Dire Portents
But what interests me more is the portent of such a dramatic decline for the price of crude oil. From what I read, China holds significant responsibility for the current price of oil because of its voracious appetite. But if the stock market is a forward discounting mechanism, that means that the Chinese economy is about to decelerate or even go into a tailspin.

The corollary of that is lower demand for oil and, if I remember Economics 101 correctly, that would mean a lower oil price - all things being equal.

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To find a more gloomy view from the retail investor’s camp we’d have to go back to mid January when the AAII sentiment reached 59% bearish.

Back then I showed you this chart:

We have definitely seen 13 weeks pass since then and within a few more weeks will also complete 26 weeks. But unlike the historic average shown in the bar chart above, the market has yet to hold a decisive rally.

The S&P 500 Index (SPX) did momentarily reach a high of 1440 but couldn’t hold on to it. For most of the time we’ve been trading below the levels at which we first saw a +50% bearish AAII sentiment. As I’ve outlined before, sentiment during a bear market is a different beast.

Hulbert Newsletter Sentiment
Mark Hulbert is worried that while we may have put in a significant bottom with the March low, it may not hold. According to the Hulbert Stock Newsletter Sentiment Index (HSNSI) the average exposure recommended is a paltry 2.2%. And while this is low, back in early March the average newsletter editor was downright panicking with a -29.2% exposure - meaning actually being short the market with almost a third of total portfolio allocation.

As we head into a possible retest, it isn’t reassuring to see sentiment sitting so much above those levels. The ideal sentiment that would catapult us higher would be an even more intense panic with the kind of market weakness we’ve seen. While that may change anytime, the HSNSI doesn’t reflect that right now.

Investor’s Intelligence
No significant change in this sentiment measure: bullss dropped from 44.8% to 43% and bears increased slightly from 31.1% to 32.6%. It isn’t offering much of an edge as it sits in lukewarm waters similar to the Hulbert analysis.

CBOE Put Call Ratio
While the traditional put call ratio (equity only) did rise during the turmoil of this week, we didn’t see it reach or exceed the important 1.0 milestone. In fact, it only was able to muster a high of 0.84 on Wednesday. That reflects a good amount of fear but just not enough to carve out an important inflection point.

ISEE Sentiment
This past Wednesday and Thursday the ISEE Sentiment measure fell to 74 and 75 - the lowest since mid March low this measure reached 56 (March 10th 2008).

Remember, the ISEE sentiment numbers are calculated differently from the CBOE put call ratio. For one, the ratio is inverted with calls as the numerator and puts as the denominator. Further, the ISE only uses options which are traded by non-market makers, stripping out the noise and showing what retail and institutional traders are doing. And lastly, the ISE data is for opening orders only.

All in all, a much more robust and useful measure of options trading sentiment.

Rydex Traders
According to Jason Goepfert:

Rydex traders had finally started focusing on “safe” funds more than “risky” funds - a stark change from earlier in May when they were five times more likely to trade a risky fund than a safe one. As of yesterday, the ratio fell under 0.5, meaning that those folks were more than twice as likely to trade a safe fund than a risky one.

Conclusion
Since I eschew using a single indicator to light the way, the weight of the indicators are confusing with many cross currents pulling me in different directions. The troubling and somewhat muddy sentiment outlook doesn’t help. Hopefully things will resolve themselves soon and the picture will become clearer.

Chart from indexindicators.com

That is oversold but according to Lowry’s research, when the market reaches below 10% for this indicator, we have a setup for a powerful snap back rally that most of the time transforms into a full blown bull market rally.

The good news is that the S&P 500 Index (SPX) is approximately 60 points above its March levels here while it has pushed the percentage of stocks above their short term average to these low numbers. The bad news is that technically, we didn’t go below 10% but actually reached 10.2% and recovered.

Select Sector SPDR Correlation Tracker

Any quantjock worth his salt will laugh at such a simplistic treatment of correlation but for the rest of us it is a useful tool. How useful is it and why would you want that kind of information in the first place?

Knowing the correlation of one stock to another helps you in define your portfolio. After all, what good is owning separate stocks or even ETFs if most of them are correlated? If you don’t diversifying your holdings you are at risk that a market shock will effect them all at once and in the same way.

Another reason to look for correlated stocks is to engage in pair trading. This is where you aren’t interested in a stock per se but the relationship between two stocks. There are different strategies but the simplest is to watch the relationship and when it gets out of historical norms, to go long one and short the other.

Another online resource is Market Topology, now renamed: Impactopia.

They offer more robust analysis with a choice of time frames as well as the ability to graph the spread of two stocks or each, side by side. To use the site you may find it asks you to sign up but the service is free.

Impactopia has other goodies if you explore enough. For example, it plots a “tree” of the security you are curious about mapping out its relationship with other securities. You can see Google’s (GOOG) tree to above.

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and for good measure, here is a chart of crude oil priced in Japanese Yen:

You’ll notice I didn’t include the axis on the charts - that’s because they would have been meaningless since I took the price of crude and calculated a ratio of it and the Euro Index and the Yen Index. So the charts are a very good approximation but not exact in showing crude in either currency. They are still useful and do provide a lot of information.

In any case, they show pretty much the same thing as the normal crude oil chart (priced in US dollars). It is safe to say that everyone is hurting.

I have family in Europe and they tell me things are very grim economically. From anecdotal evidence it would seem even more so that in North America, Europe is undergoing a deep recession.

Readers from Europe are free to chime in with their own views

It is a lesser known indicator but basically it compares the number of stocks going up and down. You can get more background information here, in case you’re unfamiliar with the new high new low index.

It is surprising to see that this indicator has been stuck consistently below 60 for the longest duration of time since the 2002 bear market. As the chart shows, this indicator stays low when we are going through a bear market and high when we are going through a bull market (as in the green box in 2003).

By the way, I’m showing a chart for the Nasdaq as opposed to the NYSE because the ever increasing number of non-common stock securities traded on that exchange has made most internal analysis of it fairly worthless.

In any case the chart above confirms what most of us know on an intuitive level: it feels like a bear market out there. Doesn’t it? Well, even though technically we aren’t in one. That doesn’t seem to matter. The tape is sluggish and the advance decline numbers also bear that out:

Last Friday’s weak market took us down to negative 1788 - extreme low advance decline breadth levels which we last saw in the swing lows of March (green arrow). But even so, it takes more than just one spike like that to wring out the market and set it up for a rally.

And in case you are wondering why I use the raw advance decline data, instead of the cumulative breadth data like most, it is because cumulative breadth is misleading.

For a strong and healthy bull market, either the advance decline must remain above such lows or when it does fall so low, it is preferable for a bouquet of extreme low readings which serves to flush out the weak hands (green boxes).

If you look closely, you can see what I mean about non-common stock securities ruining NYSE advance decline data. If you were only going by NYSE data, in June 2007, you would have mistakenly thought that the market was oversold.

So we seem to be in a bit of a limbo - not quite a bear market, not quite a bull market. Or maybe I’m projecting my own ambivalence onto the charts. What do you think?

Well, it turns out that even priced in that “currency” oil is expensive.

In fact, each time that the ratio of oil to gold spikes up, the price of oil (in dollars) falls. The first spike on the chart is in late 1990 and corresponds to the Persian Gulf war.

The next time was in late 2000 when crude oil peeked above $36 and then retreated. The ratio’s significance gets a bit wobbly in 2005 since oil didn’t find a top until the summer of 2006.

And finally, that brings us to today. Or rather last Friday when oil closed up the most dollars in a day in its trading history and hit the circuit breakers. Could the explanation be that the market smells war (with Iran)? Many believe so.

The above graph looks like it might have a slightly upward channel - which would imply that if this ratio has any significance, a top in oil is close at hand.

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Hulbert Newsletter Sentiment
According to Mark Hulbert, out of 10 market timing newsletters with the best risk adjusted performance, seven are bullish right now. Among the ten, their average equity allocation is a whopping 78%! This is especially meaningful when compared with what the worst market timers are saying: an equity allocation of just 11%.

So unless you think that all of a sudden the pattern of performance is going to be upended, this is a very bullish sign for the market.

ISE Sentiment
We got a surprising uptick in the ISE Sentiment index this past week. On Thursday it peaked at 192. To provide some perspective, on October 8th, 2008 the ISE sentiment index reached 279 and on October 29th 2008 it reached 275. The October swing high of around 1560 was put in between these two dates.

And finally in mid May, when the market made its swing top, the ISE sentiment was 225. We didn’t really approach record highs for this measure but usually anything around 200 shows significant risk aversion (the ISEE sentiment is a ratio of calls to puts).

LowRisk Sentiment
A few people contacted me asking about LowRisk and as I mentioned before I haven’t received any response from Jeff Walker after inquiring about LowRisk. Their site continues to be stuck on March data with no updates as of yet. Unfortunately, it looks like this sentiment measure is no more.

So more or less we continue to muddle through with lukewarm sentiment on average. I continue to see the March bottom however, as significant and these counter currents we’ve seen lately don’t necessarily negate that.