As of last Friday, the NASDAQ composite index is up 21% year-to-date, while the DJIA is down 12% from it’s mid-January all-time high. Indeed, according to Bloomberg News, through February 11^th the Dow was off to its worst start in eight decades, suffering its biggest decline in a comparable period since 1920.

Over the short-term, the 5-day average put/call option ratio stood at .42 last Friday, an extremely low level. Speculators are buying more than two calls for each put, indicating excessive optimism among speculators. Speculators usually are dead wrong near major market turns, so this important contrary indicator is screaming sell!

So is another sentiment indicator, the ARMS (TRIN) index, which is a reflection of money flows into advancing stocks versus declining stocks. The 5-day moving average is at a highly overbought reading of .694. Investors have been selling the laggards and pouring the proceeds into the hot stocks of the day, a sign of excessive optimism in the ranks of the fewer and fewer stocks holding up the markets.

The intermediate-term Elliott Wave patterns are (once again) portending an immediate and significant drop. The DJIA appears to have completed a first wave down from the January high of 11,750, and is currently completing its Wave 2 partial rebound. The next significant move should be a large Wave 3, bringing the DJIA well below the 9,000 mark. The NASDAQ 100 index (NDX) appears to be completing a bearish ending diagonal triangle, which should rollover into a dramatic drop at least below 4,000.

The advance/decline line remains on life support in the ICU. As Jim Stack of InvesTech elaborated upon in our 02/28/00 chart of the week, the A/D line and the New High/New Lows ratio have been diverging and are screaming "Danger, Will Robinson!"

US STOCKS REMAIN ON FULL CRASH ALERT!

So what’s behind all of this irrational exuberance which appears to be the last thing holding up the markets? Perhaps it’s none other than the man who coined the phrase himself, Sir Alan of Greenspan.

The media and the pundits have been idolizing Sir Alan with irrational exuberance as though he were a rock star. He may be the first non-president to be enshrined on Mt. Rushmore. Here’s a sampling of recent praise:

"Alan Greenspan, superstar, … the most influential man on Earth." headline in AP story.

"We have deified the man. He is seen as a god." David Jones, Aubrey Lanston & Co.

"The greatest central banker in the history of the world!" Senator Phil Gramm of Texas.

"Greenspan is the new magic man of the Millennium." Der Spiegel magazine.

This morning (March 6^th), Sir Alan spoke at a "New Economy" conference at Boston College. March 6^th was also Sir Alan’s birthday, his 74^th. As he strode on stage (looking more and more like a different Allen, Woody),

Sir Alan was greeted by a standing-room-only, standing ovation. Massachusetts Congressman Edward Markey led the 1,800 Greenspan fans in a less than rousing rendition of Happy Birthday. Rep. Markey, (looking and acting like a small-chinned Jay Leno), wrapped up the birthday celebration by prompting the crowd with "let’s hear it for a great chairman, ladies and gentlemen." The ovation resumed and Sir Alan’s status as superstar, hero, legend, genius, guru, and god, remains intact for at least another day.

Sir Alan of course then went on to bore the audience with his patented brand of tongue-twisting yet hollow econo-babble that his Wall Street groupies loves to hear. After all, this is the man who once said: "If I seem unduly clear to you, you must have misunderstood what I said."

Sir Alan has been declared our secular savior, even though no one can decipher his pronouncements. Nevertheless, he shall watch over us and protect us and lead us unto the Promised Land. The bull market shall last forever. Amen.

So how does any of this relate to the stock market? Well, according to a recent CBS MarketWatch story, a survey of business economists say that the Fed is protecting shareholders because a possible stock market bubble is the No. 1 problem facing the economy.

"The Fed has a PR problem because the Fed has denied that it's protecting the stock market. … The perception is that the Fed will save them. … It’s creating a moral hazard."

Should you even care about the Fed’s actions? As we’ve pointed out in several past Grizzly’s Growlings, the Fed's actions have little real consequence to the markets. The Fed is always lagging the markets and reacting to the changes that have already taken place. They’re just trying to avoid getting caught with their pants down, being too far out of line with market rates.

Speaking of the Feds getting caught with their pants down, check out http://nypostonline.com/business/25545.htm