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The Ultimate Contrarian Indicator

Wednesday, 22 Dec 2010 | 4:45 PM ET

CNBC's Jeff Cox: Is the Popularity of Equities the Ultimate Contrarian Indicator? (CNBC)

"With investor sentiment bubbling at levels comparable to just before the market's historic highs in 2007, now may be the time to pull back some before the froth gets out of hand. Strategists are almost universal in expectations for the market to climb from 10 percent to 20 percent in 2011, and investor polls show bullishness around 60 percent. Those are numbers reminiscent of October 2007, just before the worst of the financial crisis hit and the market lost more than half its value."

Bank Bonus Dip is Global (Reuters)

"From Wall Street to the City of London to Hong Kong's Central District, bankers are bracing for bonuses to be down 7 percent on average from a year ago, and higher salaries will only partially cushion the hit, a Reuters/IFR global poll shows. Some finance industry professionals are expecting drops as steep as 30 percent after weak trading results that are depressing bank profits and shrinking the bonus pool, according to the poll of more than 25 professionals. Unlike in other industries, bankers typically rely on year-end bonuses for a large portion of their yearly compensation."

Trading the News (New York Times)

"The number-crunchers on Wall Street are starting to crunch something else: the news. Math-loving traders are using powerful computers to speed-read news reports, editorials, company Web sites, blog posts and even Twitter messages — and then letting the machines decide what it all means for the markets. The development goes far beyond standard digital fare like most-read and e-mailed lists. In some cases, the computers are actually parsing writers’ words, sentence structure, even the odd emoticon. A wink and a smile — ;) — for instance, just might mean things are looking up for the markets. Then, often without human intervention, the programs are interpreting that news and trading on it. "

Cornering Copper in London? (Wall Street Journal)

"As commodity prices soar to new records, the ability of a few traders to hold huge swaths of the world's stockpiles is coming under scrutiny. The latest example is in the copper market, where a single trader has reported it owns 80%-90% of the copper sitting in London Metal Exchange warehouses, equal to about half of the world's exchange-registered copper stockpile and worth about $3 billion. The report coincided with copper prices reaching record highs Tuesday.

Commodities prices rallied along with stocks. The Dow Jones Industrial Average gained 55.03 points, or 0.5%, to 11533.16, its highest level since August 2008. Crude oil jumped to its highest level in more than two years and topped $90 a barrel in late electronic trading in New York. Corn and soybeans rose amid worries about hot weather in Argentina." Note to those with short memories: A similar strategy didn't work out well for The Hunt Brothers.

Oil Hits Two Year High (Reuters)

"Oil prices surged to a 26-month high on Wednesday near $91 a barrel as a third straight weekly drop in U.S. crude inventories and cold weather on both sides of the Atlantic spurred pre-holiday buying.

Crude stockpiles fell 5.3 million barrels last week, bringing the past three weeks' declines to 19 million barrels, roughly equivalent to one day of U.S. fuel consumption. Companies have drawn down inventories for year-end accounting purposes, analysts said."

Some Analysts Now Believe 2010 Isn't Yet the Bottom (Financial Times)

"The US economy grew slower than Wall Street analysts had expected in the third quarter, and the housing market continued to struggle, highlighting the challenges of sustaining a fragile recovery.

Analysts, who had initially forecast that 2010 would see a modest upturn in housing, are now predicting that prices will decline in 2011 by as much as 10 per cent, as a record number of distressed properties floods the market. The ongoing weakness has prompted some Wall Street economists to call for major intervention by Washington to head off prolonged stagnation."

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