You've heard of the VIX, put/call ratios and the Investors' Intelligence survey. These are sentiment readings used as contrary indicators to get a feel for the level of fear or greed in the market.

When fear is present, institutions, hedge funds and traders are buying put options, and advisers, as a group, are bearish in their newsletters. Market participants are less willing to take the risk of sinking money, outright, into equities or speculative sectors. When greed is present, players obviously snap up stock. What they buy can be a gauge of the degree of speculative fervor. The groups that get bought can serve as a kind of sentiment gauge, indicating the market's appetite for risk.

Hungrier for Spec

Two factors suggest the market has regained its taste for speculation. Let's begin with industry groups. A survey of the current leaders shows that the dominant groups are those normally associated with risk-taking.

The top 10 groups read like a who's who of the 1999 speculative boom leaders: fiber optics, Internet e-commerce, chip manufacturers, data storage, enterprise software, wireless equipment, cable/satellite TV, generic drugs, Internet content and computer networking. Most of these were among the leading groups during the halcyon days of 1999-2000, an era that launched many stocks to the stratosphere and gave us Nasdaq 5000.

Then, like fallen angels, fiber, Nets, networkers and semis retreated to the lowest rung among industry group names and have stayed there for years -- until recently. Their current standing in the top 10 shows that traders are once again hungry for risk and willing to sink money into some of the most speculative groups.

Another indicator of the market's building stomach for spec issues can be seen by comparing the blue-chip

S&P 500 futures

(SPM3:CME) with the tech-laden

Nasdaq 100 futures

(NDM3:CME). This year, the S&Ps have come to within 2% of the five-year low struck last October.

Meanwhile, the Nasdaq 100 has managed to stay about 15% above its October 2002 low. Traders didn't sell down tech issues as much as blue-chips in January, February and March. Therefore, the Nasdaq 100 has performed relatively better than the S&P and stands just 6% off its six-month high. This also demonstrates -- despite a negative year so far in the indices -- a growing appetite for speculative issues.

Given the current chart formation and short-term overbought status of the Nasdaq 100, I wouldn't be surprised to see a Cooper Rule of Four breakout after a pullback from the current one-month high. Rules of Four can be powerful patterns, ones that are well-fed by an appetite for risk-taking. (

Click here to look at the charts of corn and cocoa that had Rule of Four breakouts last year before embarking on heady runs.)

In Other Markets

June

T-bonds

(USM3:CBOT) have sold off, shedding some of the safe-haven premium built into their price. Now that they've cascaded, T-bonds have come into a time and price zone that readies them for a reversal. On Thursday, T-bonds closed in the middle of a four-cluster price zone defined by 110 16/32 to 110 26/32. This coincides with a Fibonacci time zone that also identifies Thursday (March 20) as a potential reversal date. A trade back through 110 12/32 would negate the long setup.

May

feeder cattle

(FCK3:CME) sold off Thursday after an early pop into the

78.000 zone. The positive start provided a second chance to get short in a market that has shown it's still in a downtrend trend by having not violated its bearish symmetry.

May

cotton

(CTK3:NOBOT) is one of the leading upside momentum markets among the most widely followed futures contracts. The law of inertia suggests it will rally again out of its pullback-from-high setup. Strong Fibonacci support resides at 58.15 to 58.35. Two ways to trade this are to wait for a pullback directly into the zone before entering long or to wait for cotton to trade above the high of the low bar in the pullback before entering.

Marc Dupee is an independent trader and co-author of the book

The Best: Conversations With Top Traders. Dupee was formerly markets analyst and futures editor for TradingMarkets Financial Group. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he invites you to send your feedback to

Marc Dupee.

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