Weekly Sentiment Review

I am still positioned materially net long going into this week. I think the market's are poised to break out at a time when many are ill-positioned for it. The SPY made a new high on Friday, as did the MDY (mid-cap index). And lots of growth stocks are breaking out to new highs, as well as the unstoppable energy complex.

I think this is another "unwelcomed" rally, as my colleague (at TheStreet.com) Bob Marcin coined it earlier this year. I can't tell you how many hedgies out there love to play the seasonality in the market. Since the September-October time frame is often one during which the market experiences a correction, they have been pressing their short bets.

So short interest levels remain extremely elevated, and options expiration this week could exacerbate those positions. If the market breaks to new highs, I would expect to see short-covering kick in and add fuel to the fire.

Here is where some of the indicators I follow stand:

• The Specialist Short Ratio is still near multi-decade lows (0.16)
• The Rydex Nova/Ursa ratio is at yearly lows (0.18)
• The 10-day put/call ratio is still elevated at 0.96
• The bull/bear spread in the AAII survey is +10 (42% bulls, 32% bears); well off the +44 level reached back in mid-July

I have a long list of buy candidates that I am weeding through. I'll throw up some of the charts tomorrow.