Posts Tagged ‘Amp’
Wanted: More New Highs
Monday, August 20th, 2012
The fact that the S&P 500 is back near multi-year highs is certainly enough to make bulls happy. That being said, the rally has hardly been broad. As one example, the Utilities sector, which is comprised of 31 stocks in the S&P 500, was down every day this week. Earlier in the week, we also noted that in the most recent leg higher, the Russell 2000 has been underperforming the S&P 500.
In terms of new highs, we have also seen a narrowing of the rally. Back in late March and early April when the S&P 500 made a new bull market high, the number of stocks in the S&P 500 hitting new highs got as high as 78, or 15.6% of the index. Today, however, the number of new highs was just a little more than half the peak reading we saw in the Spring. Of the 500 stocks in the S&P 500, there were 42 stocks that hit a new high (8.4% of the index).
The reason for the smaller number of new highs stems from the fact that the rally is being led by megacaps (like AAPL), which stocks with smaller market caps have lagged. This doesn’t necessarily mean that the rally is doomed. Rather, the less broad based nature of the rally means that it is imperative for investors to be in the right stocks. For a lot of us, just summoning up the courage to get into the market is hard enough. Now, we also have to worry about picking the right stocks!
Copyright © Bespoke Investment Group
Tags: Aapl, Amp, Bespoke Investment Group, Bulls, Courage, Investors, Market Caps, New Highs, Rally, Russell 2000, Stocks
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Cautious Bullish Stance Appropriate – Accumulate the Stronger Seasonal Sectors
Monday, August 20th, 2012
by Don Vialoux, TechTalk
Economic News This Week
FOMC minutes for the July 31st /August 1st meeting are released at 2:00 PM EDT on Tuesday.
June Canadian Retail Sales to be released at 8:30 AM EDT on Wednesday are expected to increase 0.1% versus a gain of 0.3% in June.
July Existing Home Sales to be released at 10:00 AM EDT on Wednesday are expected to increase to 4.55 million units from 4.37 million units in June.
Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected slip to 365,000 from 366,000 last week.
July New Home Sales to be released at 10:00 AM EDT on Thursday are expected to increase to 368,000 from 350,000 in June.
July Durable Goods Orders to be released at 8:30 AM EDT on Friday are expected to increase 2.5% versus a gain of 1.3% in June. Excluding transportation, Goods are expected to increase 0.5% versus a decline of 1.4% in June.
Earnings Reports This Week
Equity Trends
The S&P 500 Index added 12.29 points (0.87%) last week. Intermediate trend changed from down to neutral on a break above resistance at 1,415.23. Next resistance is at 1,422.38. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking.
Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 81.40% from 80.20%. Percent is intermediate overbought, but has yet to show signs of peaking. Percent has reached a level where an intermediate peak above the 80% level normally leads to at least a short term correction.
Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 73.40% from 70.60%. Percent remains intermediate overbought, but has yet to show signs of peaking
The ratio of S&P 500 stocks in an uptrend to a downtrend (i.e. the Up/Down ratio) increased last week to (289/128=) 2.26 from 1.92. The ratio is intermediate overbought, but has yet to show signs of peaking.
Bullish Percent Index for S&P 500 stocks increased last week to 70.00% from 67.80% and remained above its 15 day moving average. The Index remains intermediate overbought, but has yet to show signs of peaking.
The Up/Down ratio for TSX Composite stocks increased last week to (139/81=) 1.72 from 1.46. The ratio is intermediate overbought, but has yet to show signs of peaking.
Bullish Percent Index for TSX Composite stocks increased last week to 60.57% from 56.91% and remained above its 15 day moving average. The Index remains intermediate overbought, but has yet to show signs of peaking.
The TSX Composite Index gained another 199.00 points (1.67%) last week. Intermediate trend changed from down to up on a break above resistance at 11,936.16. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains negative.
Percent of TSX stocks trading above their 50 day moving average increased last week to 69.92% from 66.26%. Percent is intermediate overbought, but has yet to show signs of peaking. Peaks near the 70% level normally lead to at least a short term correction by the Index.
Percent of TSX stocks trading above their 200 day moving average increased last week to 48.37% from 40.65%. Percent continues to trend higher.
The Dow Jones Industrial Average gained another 67.25 points (0.51%) last week. Intermediate trend is up. Next resistance is at 13,338.66. The Average remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains negative.
Bullish Percent Index for Dow Jones Industrial Average stocks increased last week to 86.67% from 83.33% and remained above its 15 day moving average. The Index remains intermediate overbought, but has yet to show signs of peaking.
Bullish Percent Index for NASDAQ Composite stocks increased last week to 53.69% from 52.42% and remained above its 15 day moving average. The Index continues to trend higher.
The NASDAQ Composite Index gained another 57.74 points (1.81%) last week. Intermediate trend is up. Next resistance is at 3,134.17. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index has changed from negative to at least neutral.
The Russell 2000 Index added 18.34 points (2.29%) last week. Intermediate trend is down, but turns positive on a break above resistance at 820.44. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index has changed from negative to at least neutral.
The Dow Jones Transportation Average gained 130.83 points (2.58%) last week. Intermediate trend is down. Resistance is at 5,290.06. The Average moved back above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains negative.
The Australia All Ordinaries Composite Index added 91.02 points (2.12%) last week. Intermediate trend is down. Support is at 4,033.40 and resistance is at 4,515.00. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains neutral.
The Nikkei Average gained another 271.06 points (3.05%) last week. Intermediate trend changed from down to up on a break above resistance at 9,136.02 on Friday. The Average remains above its 20 and 50 day moving averages and moved above its 200 day moving average last week. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index has changed from negative to at least neutral.
The Shanghai Composite Index slipped another 53.92 points (2.49%) last week. Intermediate trend is down. The Index remains below its 50 and 200 day moving averages and fell below its 20 day moving averages last week. Short term momentum indicators are trending down. Strength relative to the S&P 500 Index remains negative.
The London FT Index added 0.91 (0.02%), the Frankfurt DAX Index improved 75.89 points (1.09%) and the Paris CAC Index gained 31.67 points (0.92%) last week.
The Athens Index added 21.04 points (3.40%) last week. The Index remained above its 20 and 50 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains slightly negative.
Currencies
The U.S. Dollar Index added 0.05 (0.06%) last week. Intermediate trend is up. Support is at 81.16 and resistance is at 84.10. The Index remains just below its 20 and 50 day moving averages. Short term momentum indicators are trending down. Stochastics already are oversold.
The Euro added 0.42 (0.34%) last week. Intermediate trend is down. Support is at 120.42 and resistance is at 126.93. The Euro remains below its 50 and 200 averages, but remains above its 20 day moving average. Short term momentum indicators are trending higher. Stochastics already are overbought.
The Canadian Dollar added 0.18 U.S. cents (0.17%) last week. Intermediate trend is neutral. Support is at 95.76 and resistance is at 102.05. The Dollar remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking.
The Japanese Yen fell 2.07 (1.62%) last week. Intermediate trend is down. Support is at 124.12 and resistance is at 128.77. The Yen fell below its 20, 50 and 200 day moving averages. Short term momentum indicators are trending down. Stochastics already are oversold.
Commodities
The CRB Index added 1.67 points (0.55%) last week. Intermediate trend is up. The Index remains above its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index has turned neutral.
Gasoline dropped $0.11 (3.65%) when the futures contract rolled over. Gasoline remains above its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index remains positive.
Crude oil gained another $2.39 per barrel (2.56%) last week. Intermediate trend is up. Crude remains above its 20 and 50 day moving averages and just below its 200 day moving average. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains positive.
Natural Gas fell another $0.06 per MBtu (2.15%) last week. Intermediate trend is up. Resistance has formed at $3.28. Gas remains below its 50 day moving average and fell below its 20 day moving average last week. Short term momentum indicators are trending down. Strength relative to the S&P 500 Index has changed from up to at least neutral.
The S&P Energy Index slipped 0.78 points (0.14%) last week. The Index is testing resistance at 544.25. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains positive.
The Philadelphia Oil Services Index gained 0.97 (0.42%) last week. The move above a reverse head and shoulder pattern continues. The Index remains above its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index remains positive.
Gold slipped $4.00 per ounce (0.25%) last week. Intermediate trend is down. Support is at $1,526.70 and resistance is at $1,642.40. Gold remains above its 20 and 50 day moving averages and below its 200 day moving averages. Short term momentum indicators are neutral. Strength relative to the S&P 500 Index remains neutral.
The AMEX Gold Bug Index added 4.88 points (1.13%) last week. Intermediate trend is down. Support is at 372.74 and resistance is at 464.76. The Index remains above its 20 and 50 day moving averages. Short term momentum indicators are trending higher. Strength relative to gold remains positive.
Silver added $0.01 per ounce (0.04%) last week. Intermediate trend is down. Support is at $26.10 and resistance is at $28.44. Silver remains below its 200 day moving average and above its 20 and 50 day moving averages. Short term momentum indicators are trending higher. Strength relative to gold remains neutral.
Platinum jumped $68.90 per ounce (4.92%) last week following labor strife at Lonvin, the world’s third largest platinum mine. Strength relative to gold turned from negative to positive. Platinum moved above its 20 and 50 day moving average.
Palladium jumped $23.75 (4.00%) last week. Nice breakout on Friday on a Leibovit Volume Reversal! Strength relative to the S&P 500 Index had turned from negative to positive.
Copper was unchanged last week. Intermediate trend is down. Support is at $3.24 and resistance is at $3.56. Copper moved back above its 20 and 50 day moving averages on Friday. Short term momentum indicators are neutral. Strength relative to the S&P 500 Index remains negative.
The TSX Global Metals and Mining Index eased 8.48 points (0.97%) last week. Intermediate trend is down. Support is at 781.13. The Index remains above its 20 and 50 day moving averages. Short term momentum indicators are trending higher. Stochastics already are overbought. Strength relative to the S&P 500 Index has been negative and showing early signs of change.
Lumber gained another 6.89 points (2.29%) last week. Lumber remains above its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index remains positive.
The Grain ETN slipped $0.22 (0.35%) last week. Units remain above their 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index has turned negative.
The Agriculture ETF added $0.23 (0.46%) last week. Intermediate trend is up. Units remain above their 20, 50 and 200 day moving averages. Short term momentum indicators are overbought and showing early signs of peaking. Strength relative to the S&P 500 Index remains negative.
Interest Rates
The yield on 10 year Treasuries increase 16.7 basis points (1.01%) last week. Short term momentum indicators are overbought, but have yet to show signs of peaking.
Conversely, price of the long term Treasury ETF fell another $4.10 (3.26%) last week.
Other Issues
The VIX Index fell another 1.29 (8.75%) last week. It broke support at 13.66 to reach a five year low. Short term momentum indicators are oversold, but have yet to show signs of bottoming.
Earnings reports to be released this week are unlikely to have a significant impact on equity markets.
Economic reports this week are expected to be neutral/positive this week. Next major event is the Jackson Hole Economic conference where Benanke and Draghi are scheduled to speak.
Macro news heats up this week. China and the Eurozone release their PMI reports on Thursday. Mid-east tensions continue to ramp up.
Short and intermediate technical indicators for most equity markets and sectors are overbought, but have yet to show signs of peaking.
North American equity markets have a history of moving flat to lower in mid-August. September historically is the weakest month of the year. Seasonality turns positive after mid-October.
Cash on the sidelines on both sides of the border is substantial and growing. However, political uncertainties (including the Fiscal Cliff) preclude major commitments by investors and corporation. The selection of Paul Ryan as the Republican Vice President candidate has boosted Romney’s ratings on the polls, but the polls continue to show a tight race.
The Bottom Line
Equity markets on both sides of the border have had a good ride since their lows set on June 4th. The Dow Jones Industrial Average is up 10.3%, the S&P 500 Index has gained 12.0% and the TSX Composite has increased 7.9%. Investing in equity markets has become less attractive. Accumulation of seasonal trades on weakness continues to make sense as long as the seasonal trades are outperforming the market. Sectors in this category include agriculture, energy, leisure & entertainment, software and gold. A cautious bullish stance appears appropriate.
Tom Rogers’ Weekly Elliott Wave Blog
Following is a link:
http://www.tomrogers.net/signpost.htm
Special Free Services available through www.equityclock.com
Equityclock.com is offering free access to a data base showing seasonal studies on individual stocks and sectors. The data base holds seasonality studies on over 1000 big and moderate cap securities and indices.
To login, simply go to http://www.equityclock.com/charts/
Following is an example:
ETF News
The latest weekly update on ETFs in Canada to August 17th is available at
Leibovit Volume Reversal Signal on Palladium
More information on Mark’s services is available at http://www.vrtrader.com/login/index.asp
Disclaimer: Comments and opinions offered in this report at www.timingthemarket.ca are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed.
Don and Jon Vialoux are research analysts for Horizons Investment Management Inc. All of the views expressed herein are the personal views of the authors and are not necessarily the views of Horizons Investment Management Inc., although any of the recommendations found herein may be reflected in positions or transactions in the various client portfolios managed by Horizons Investment Management Inc
Horizons Seasonal Rotation ETF HAC August 17th 2012
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Tags: Activity Index, Advance Decline Line, Amp, August 1, Bank Of Australia, Board Minutes, Bullish Percent Index, Bullish Trend, Canadian, Canadian Market, Cap Index, Chicago Fed, Consumer Sentiment, Consumer Survey, Decline, Don Vialoux, Durable Goods Orders, Earnings, Economic News, Existing Home Sales, Head And Shoulders, Industrials, Initial Jobless Claims, Intermediate Trend, July 31st, Market Benchmarks, Market Performance, Market Strength, Momentum Indicators, Months Of The Year, Moving Averages, Nbsp, New Home Sales, Reserve Bank Of Australia, Resistance, Retail Sales, Russell 2000, Sales Numbers, Seasonal, Seasonal Trades, Seasonality, Sectors, Signs, Stocks, Transportation Goods, Uptrend, Us Dollar Index, Weighted Index
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Declining Long Term Trendline Suggests Near Term Peak in Equities
Tuesday, August 14th, 2012
by Don Vialoux, EquityClock.com
Upcoming US Events for Today:
- Retail Sales for July will be released at 8:30am. The market expects an increase of 0.3% versus a decline of 0.5% previous. Excluding Autos, the market expects an increase of 0.4% versus a decline of 0.4% previous.
- Producer Price Index for July will be released at 8:30am. The market expects an increase of 0.2% versus an increase of 0.1% previous. Core PPI is expected to increase by 0.2%, consistent with the previous report.
- Business Inventories for June will be released at 10:00am. The market expects an increase of 0.2% versus an increase of 0.3% previous.
Upcoming International Events for Today:
- French GDP for the Second Quarter will be released at 1:30am EST. The market expects a year-over-year increase of 0.2% versus an increase of 0.3% previous.
- German GDP for the Second Quarter will be released at 2:00am EST. The market expects a year-over-year increase of 1.0% versus an increase of 1.2% previous.
- Great Britain Consumer Price Index for July will be released at 4:30am EST. The market expects a year-over-year increase of 2.3% versus 2.4$ previous.
- Euro-Zone GDP for the Second Quarter will be released at 5:00am EST. The market expect a year-over-year decline of 0.5% versus no change (0.0%) previous.
- German Economic Sentiment Survey for August will be released at 5:00am EST. The market expects –18.5 versus –19.6 previous.
Recap of Yesterday’s Economic Events:
The Markets
Equity markets traded mixed on Monday during a low volume session that saw the S&P 500 trade on either side of the 1400 mark. Volume has been a significant factor in recent trade, showing some of the lowest levels in years. Monday was no different with the S&P 500 ETF (SPY) showing the lowest volume day since April 25th 2011, approximately the 2011 peak. Volume has clearly been problematic as it provides evidence of a lack of conviction to equities; investors are showing no impetus to buy or sell. Investors are clearly waiting for a catalyst, preferably in the form of central bank easing to give equities a quick boost, despite how bad economic fundamentals get. The sustainability of this is obviously questionable.
Equity markets have had a substantial run since the low set at the beginning of June. The S&P 500 has added over 140 points from the low of 1266 to the recent high of 1407. Resistance is now at hand, as presented by the March and April peaks. Reaction to this peak will be critical in determining the strength behind this market. Rejection from this level could chart a double top, which would likely follow with a significant selloff. A healthy breakout, ideally accompanied by a pickup in volume, could see the continuation of this rally into the fall, a period that is typically negative on a seasonal basis. An increase in the number of stocks breaking out to new 52-week highs is an ideal tell to hint of a breakout to come. Unfortunately, the number of stocks breaking to new 52-week highs has been declining since the start of July, a situation similar to what was realized from February through April of this year in which equity market trends remained positive, but momentum deteriorated prior to a peak. This divergence compared to recent price activity could be warning of a near-term peak in equities.
World equity benchmarks are also approaching a level of resistance presented by a declining long-term trendline. Reaction to this point of resistance is expected, potentially bringing an end to the bullish rally that has remained intact for two and a half months. Descending triangle patterns, potentially a bearish setup, can also be derived from the charts, suggesting negative things ahead for equities. June’s lows will be critical point to watch upon any pullback from the recent intermediate positive trend.
Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.80. The ratio is back within the bounds of the falling wedge pattern.
S&P 500 Index
Chart Courtesy of StockCharts.com
TSE Composite
Chart Courtesy of StockCharts.com
Horizons Seasonal Rotation ETF (TSX:HAC)
- Closing Market Value: $12.36 (down 0.08%)
- Closing NAV/Unit: $12.37 (down 0.15%)
Performance*
| 2012 Year-to-Date | Since Inception (Nov 19, 2009) | |
| HAC.TO | 1.56% | 23.7% |
* performance calculated on Closing NAV/Unit as provided by custodian
Click Here to learn more about the proprietary, seasonal rotation investment strategy developed by research analysts Don Vialoux, Brooke Thackray, and Jon Vialoux.
Copyright © EquityClock.com
Tags: Amp, Business Inventories, Consumer Price Index, Conviction, Core Ppi, Decline, Don Vialoux, Economic Events, Economic Sentiment, ETF, ETFs, Euro Zone, GDP, German Gdp, great Britain, Impetus, Producer Price Index, Report Business, Retail Sales, Second Quarter, Thackray, Trendline, Volume Session
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Technical Talk: Intermediate Trend is Down, Short Term Indicators Overbought, Not Yet Peaked (August 13, 2012)
Monday, August 13th, 2012
by Don Vialoux, timingthemarket.ca
Economic News This Week
July Producer Prices to be released on Tuesday at 8:30 AM EDT is expected to increase 0.2% versus a gain of 0.1% in June. Core PPI is expected to increase 0.2% versus a gain of 0.2% in June.
July Retail Sales to be released on Tuesday at 8:30 AM EDT are expected to increase 0.3% versus a drop of 0.5% in June. Ex autos, July Retail Sales are expected to improve 0.4% versus a decline of 0.4% in June.
The August Empire State Manufacturing Index to be released on Wednesday at 8:30 AM EDT is expected to slip to 7.2 from 7.4 in July.
July Consumer Prices to be released on Wednesday at 8:30 AM EDT are expected to increase 0.2% versus no change in June.
July Industrial Production to be released on Wednesday at 9:15 AM EDT is expected to increase 0.5% versus a gain of 0.4% in June. July Capacity Utilization is expected to increase to 79.2 from 78.9 in June.
July Housing Starts to be released on Thursday at 8:30 AM EDT are expected to slip to 752,000 from 760,000 in June.
August Philadelphia Fed to be released on Thursday at 10:00 AM EDT is expected to improve to -4.0 from -12.9 in July.
August Michigan Consumer Sentiment to be released on Friday at 9:55 AM EDT is expected to slip to 72.2 from 72.3 in July.
July Leading Indicators to be released on Friday at 10:00 AM EDT are expected to increase 0.2% versus a 0.3% decline in June.
Earnings Reports This Week
Equity Trends
The S&P 500 Index added 14.88 points (1.07%) last week. Intermediate trend is down. Support is at 1,266.74 and resistance is at 1,415.22. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking.
Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 80.20% from 74.80%. Percent is intermediate overbought, but has yet to show signs of peaking. Percent has reached a level where an intermediate peak above the 80% level normally leads to at least a short term correction.
Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 70.60% from 63.60%. Percent is intermediate overbought, but has yet to show signs of peaking.
The ratio of S&P 500 stocks in an uptrend to a downtrend (i.e. the Up/Down ratio) increased last week to (273/142=) 1.92 from 1.40. The ratio is intermediate overbought, but has yet to show signs of peaking.
Bullish Percent Index for S&P 500 stocks increased last week to 67.80% from 63.00% and remained above its 15 day moving average. The Index remains intermediate overbought, but has yet to show signs of peaking.
The Up/Down ratio for TSX Composite stocks increased last week to (131/90=) 1.46 from 1.02. The ratio is intermediate overbought but has yet to show signs of peaking.
Bullish Percent Index for TSX Composite stocks increased last week to 55.91% from 51.63% and remained above its 15 day moving average. The Index is intermediate overbought, but has yet to shows signs of peaking.
The TSX Composite Index gained 228.30 points (1.96%) last week. Intermediate trend is down. Support is at 11,209.55 and resistance is at 11,936.16. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains negative.
Percent of TSX stocks trading above their 50 day moving average increased last week to 66.26% from 52.44%. Percent is intermediate overbought, but has yet to show signs of peaking. Peaks near the 70% level normally lead to at least a short term correction by the Index.
Percent of TSX stocks trading above their 200 day moving average increased last week to 40.65% from 35.37%.
The Dow Jones Industrial Average added another 111.78 points (0.85%) last week. Intermediate trend is up. Resistance is at 13,338.66. The Average remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains negative.
Bullish Percent Index for Dow Jones Industrial Average stocks was unchanged last week at 83.33% and remained above its 15 day moving average. The Index remains intermediate overbought.
Bullish Percent Index for NASDAQ Composite stocks increased last week to 52.42% from 49.75% and moved above its 15 day moving average.
The NASDAQ Composite Index gained 52.95 points (1.78%) last week. Intermediate trend changed from down to up on a break above resistance at 2,987.94. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains negative.
The Russell 2000 Index added 13.07 points (1.66%) last week. Intermediate trend is down. Support is at 729.75 and resistance is at 820.44. The Index remains above its 50 and 200 day moving averages and moved last week above its 20 day moving average. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains negative.
The Dow Jones Transportation Average fell 22.76 points (0.45%) last week. ‘Tis the season! Intermediate trend is down. The Average fell below its 20, 50 and 200 day moving averages last week. Short term momentum indicators are neutral. Strength relative to the S&P 500 Index remains negative.
The Australia All Ordinaries Composite Index added 59.80 points (1.41%) last week. Intermediate trend is down. Support is at 4,033.40 and resistance is at 4,515.00. The Index remains above its 20 and 50 day moving averages and moved above its 200 day moving average last week. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains neutral.
The Nikkei Average jumped 336.33 points (3.93%) last week. Intermediate trend is down. Support is at 8,238.96 and resistance is at 9,136.02. The Average moved above its 20 and 50 day moving averages last week, but remains below its 200 day moving average. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index is negative, but showing early signs of change.
The Shanghai Composite Index added 36.01 points (1.69%) last week. Intermediate trend is down. Support is forming at 2.100.25 and resistance is at 2,478.38. The Index remains below its 50 and 200 day moving averages, but moved above its 20 day moving average last week. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index is negative, but showing early signs of change.
The London FT Index gained 64.23 points (1.11%), the Frankfurt DAX Index added 99.33 points (1.45%) and the Paris CAC Index improved 82.52 points (2.45%) last week.
The Athens Index gained 20.11 points (3.36%) last week. Intermediate trend is down. Support is at 471.35 and resistance is at 662.49. The Index remains below its 200 day moving average and above its 50 day moving average. Last week it moved above its 20 day moving average. Short term momentum indicators are trending higher. Strength relative to the S&P 500 Index remains slightly negative.
Currencies
The U.S. Dollar Index added 0.17 (0.21%) last week. Intermediate trend is up. Support is at 81.16 and resistance is at 84.10. The Dollar remains above its 200 day moving average and below its 20 and 50 day moving averages. Short term momentum indicators are trending down.
The Euro fell 0.87 (0.70%) last week. Intermediate trend is down. Support is at 120.42. The Euro remains below its 50 and 200 day moving averages and above is 20 day moving average. Short term momentum indicators are trending higher.
The Canadian Dollar added 1.03 cents U.S. (1.03%) last week. Intermediate trend is neutral. Support is at 95.76 and resistance is at 102.05. The Canuck Buck remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking.
The Japanese Yen added 0.45 (0.35%) last week. Intermediate trend is down. Support is at 124.12 and resistance is at 128.77. The Yen remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are trending down.
Commodities
The CRB Index added 1.12 points (0.37%) last week. Intermediate trend turned positive on a break above resistance at 305.04. The Index remains above its 20 and 50 day moving averages and briefly tested its 200 day moving average. Short term momentum indicators are trending higher. Strength relative to the S&P 500 Index is neutral/positive.
Gasoline gained another $0.08 per gallon (2.73%) last week following news of a fire at a California refinery. Gasoline remains above its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index remains positive.
Crude oil added $1.97 per barrel (2.16%) last week on growing Middle East tensions and declining inventories. Intermediate trend changed from neutral to up on a break above resistance at $93.25. Crude remains above its 20 and 50 day moving averages and below its 200 day moving average. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains positive.
Natural Gas fell $0.09 per MBtu (3.12%) last week. Intermediate trend is up. Resistance may be forming at $3.28. Gas remains above its 50 and 200 day moving average and below its 20 day moving average. Short term momentum indicators are trending down. Strength relative to the S&P 500 Index remains positive, but showing early signs of a change.
The S&P Energy Index added 12.38 points (2.34%) last week. The Index is testing resistance at 544.25. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains positive. ‘Tis the season!
The Philadelphia Oil Services Index gained 7.13 points (3.22%) last week. The move above a reverse head and shoulders pattern continues. The Index remains above its 20 and 50 day moving averages and moved above its 200 day moving average last week. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains positive. ‘Tis the season!
Gold added $15.30 per ounce (0.95%) last week. Intermediate trend is down. Support is at $1,526.70 and resistance is at $1,642.40. Gold remains below its 200 day moving average and above its 20 and 50 day moving averages. Short term momentum indicators are trending higher. Strength relative to the S&P 500 Index remains neutral/positive. ‘Tis the season!
The AMEX Gold Bug Index gained 22.62 points (5.55%) last week. Intermediate trend is down. Support is at 372.74 and resistance is at 464.76. The Index remains below its 200 day moving average and above its 20 day moving average and moved above its 50 day moving average. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to gold has turned positive. ‘Tis the season!
Silver gained $0.31 per ounce (1.12%) last week. Intermediate trend is down. Support is at $26.10 and resistance is at $28.44. Silver remains below its 200 day moving averages and above its 20 and 50 day moving averages. Short term momentum indicators are trending higher. Strength relative to gold remains neutral.
Platinum fell $2.90 per ounce (0.21%) last week. Intermediate trend is down. Platinum remains below its 20, 50 and 200 day moving averages. Short term momentum indicators are trending higher. Strength relative to gold remains negative.
Copper added $0.04 cents per lb. (1.19%) last week. Intermediate trend is down. Support is at $3.24 and resistance is at $3.56. Copper remains below its 20, 50 and 200 day moving averages. Short term momentum indicators are bottoming and trending higher. Strength relative to the S&P 500 Index remains negative.
The TSX Global Metals and Mining Index jumped 47.21 points (5.71%) last week. Intermediate trend is down. Support has formed at 781.13. The Index remains below its 200 day moving average and above its 20 day moving average and moved above its 50 day moving average last week. Short term momentum indicators are trending higher. Strength relative to the S&P 500 Index has been negative, but is showing signs of change.
Lumber gained $15.29 (5.35%) last week. On Friday, it broke to a 17 month high. Lumber remains above its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index remains positive.
The Grains ETN slipped $0.06 (0.10%) last week. Intermediate trend is up. Resistance has formed at $64.83. The ETN remains above its 20, 50 and 200 day moving averages.
The Agriculture ETF added $0.52 (1.04%) last week. Intermediate uptrend resumed on a break above resistance at $50.54. The ETF remains above its 20, 50 and 200 day moving average. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains neutral/slightly negative.
Interest Rates
The yield on 10 year Treasuries increase 0.072 (4.57%) last week. Intermediate trend changed from down to neutral on a break above resistance at 1.686%. Short term momentum indicators are overbought, but have yet to show signs of peaking.
Conversely, price of the long term Treasury ETF fell another $1.72 (1.35%) last week. It briefly broke support at $123.56.
Other Issues
The VIX Index fell another 0.90 (5.75%) last week. It broke below support at 15.45 last week. The Index remains below its 20, 50 and 200 day moving averages. Short term momentum indicators are oversold, but have yet to show signs of bottoming.
Second quarter earnings reports are winding down. The focus this week is on reports from the retail merchandisers.
Economic reports this week are expected to be neutral/positive for equity markets. The next major economic event to watch is the Jackson Hole Economic Conference hosted by the Fed from August 30th to September 1st. Bernanke previously announced Quantitative Easing at the Jackson Hole Conference. Will he announce QE III at this conference?
Macro news is relatively quiet this week. European economic data to be released on Tuesday could attract attention.
Short and intermediate technical indicators currently are overbought, but have yet to show signs of peaking.
North American equity markets have a history of moving flat to lower in mid-August
North American equity markets have a history of moving higher from July to August during a U.S. election year. However, equity markets also normally show at least a shallow correction in September and into early October.
Cash on the sidelines on both sides of the border is substantial and growing. However, political uncertainties (including the Fiscal Cliff) preclude major commitments by investors and corporations.
The Bottom Line
Equity markets on both sides of the border have had a good ride since their lows set on June 4th. The Dow Jones Industrial Average is up 9.7% and the S&P 500 Index has gained 11.0%. Investing in equity markets has become less attractive. Accumulation of seasonal trades on weakness continues to make sense as long as the seasonal trades are outperforming the market. Sectors in this category include agriculture, energy, leisure & entertainment, software and gold. A cautious bullish stance appears appropriate.
Tom Rogers’ Weekly Elliott Wave Blog
Following is a link:
http://www.tomrogers.net/signpost.htm
Special Free Services available through www.equityclock.com
Equityclock.com is offering free access to a data base showing seasonal studies on individual stocks and sectors. The data base holds seasonality studies on over 1000 big and moderate cap securities and indices.
To login, simply go to http://www.equityclock.com/charts/
Following is an example:
Platinum Futures (PL) Seasonal Chart
ETF News
The latest weekly update on ETFs in Canada to August 10th is available at
Disclaimer: Comments and opinions offered in this report at www.timingthemarket.ca are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed.
Don and Jon Vialoux are research analysts for Horizons Investment Management Inc. All of the views expressed herein are the personal views of the authors and are not necessarily the views of Horizons Investment Management Inc., although any of the recommendations found herein may be reflected in positions or transactions in the various client portfolios managed by Horizons Investment Management Inc
Horizons Seasonal Rotation ETF HAC August 10th 2012
Copyright © timingthemarket.ca
Tags: Amp, Canadian, Canadian Market, Capacity Utilization, Core Ppi, Decline, Don Vialoux, Earnings, Economic News, Empire State, ETF, ETFs, Intermediate Trend, Leading Indicators, Michigan Consumer Sentiment, Momentum Indicators, Moving Averages, oil, Philadelphia Fed, Producer Prices, Resistance, Retail Sales, Signs, Stocks, Term Indicators
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Begging for Trouble (Hussman)
Monday, August 13th, 2012
Begging for Trouble
by John P. Hussman, Ph.D., Hussman Funds
With the daily focus on European crisis and the hope of central bank intervention, one of the essential features of the investment climate – at least for long-term investors – is easy to lose in the shuffle. That feature is valuation. It’s an easy concern to overlook, because with corporate profit margins close to 70% above historical norms (largely because of unsustainably large government deficits coupled with low private savings rates – see Too Little to Lock In), Wall Street is quite happy to look at the ratio of prices to near-term earnings estimates and conclude that valuations are satisfactory. But stocks are not a claim on one year of earnings. They are a claim on a very long stream of cash flows that will actually be delivered into the hands of investors. Unfortunately, the conclusion that stocks are appropriately valued rests on the implicit assumption that profit margins will remain elevated into the indefinite future.
We presently estimate a projected 10-year total (nominal) return for the S&P 500 of less than 4.6% annually. Nothing in recent years, much less the past decade, indicates any material change in the relationship between actual market returns and expected market returns as we estimate them using a range of fundamentals including normalized earnings. Indeed, the 5.1% total return of the S&P 500 over the most recent 10-year period has been right on target (see also my July 7, 2002 comment). It’s notable that even without compelling valuations a decade ago, we lifted 70% of our hedges several months later in early 2003, at what turned out to be the start of the next bull market – something to remember for those who misunderstand our two-data sets issue of 2009-early 2010 and assume that we’ll never lift our hedges until the market is deeply undervalued.
I anticipate that a decade from now, the S&P 500 will have achieved a total return that is very weak from a long-term perspective. Remember also that you don’t “lock in” a 10-year return. You ride it out. I continue to expect that investors will have numerous opportunities to accept risk in the coming years in expectation of much better prospective returns than are presently likely.
Of course, with the yield on the 10-year Treasury bond at just 1.6%, one might argue that a prospective 10-year return of nearly 4.6% on stocks is still very good by comparison, and should be enough to prevent any substantial adjustment to lower prices and higher prospective returns. To inform that argument, I’ve added the 10-year Treasury bond yield to our standard chart below. Note that the correlation between 10-year S&P 500 returns and 10-year Treasury bond yields (which reflect both expected and actual 10-year returns, provided no default occurs) is just 0.1. There is virtually no relationship at all, with the exception of the early-1980’s, when the prospective and actual returns were quite high for both as a result of inflation shocks.
While the simultaneous rally in both stocks and bonds from the early 1980’s through the late-1990’s gave the illusion that the 10-year bond yields and forward operating earnings yields had a precise point-for-point relationship, spawning an unfortunate little cottage industry of adherents to the “Fed Model”, this model is based entirely on the relationship between stock yields and bond yields during a specific 16-year period of sustained disinflation, and there is no evidence – or even sound theory – supporting that spurious one-to-one correlation more generally.
Why aren’t the 10-year returns of stocks and bonds (prospective or actual) more closely related? The reason is simple, really. 10-year bonds have an effective duration of only about 7-8 years, depending on the coupon, which means that your ending wealth is nearly completely determined within that horizon. In contrast, stocks are very long-term assets, with an effective “duration” roughly equal to the price/dividend ratio*, which means that changes in valuation dramatically affect the terminal value of your investment even for horizons out to 30-40 years, and sometimes longer when valuations are rich and yields are low.
[*Geek’s note: You can derive this by differentiating the Gordon growth model P = D/(k-g) with respect to k, and calculating the elasticity of price to changes in the gross return: (dP/P)/{dk/(1+k)}].
Consider investors who bought stocks back in 1999 when the price/dividend ratio was 70. Those investors were assured that the value of their investment would be dramatically affected by even very small changes in yields. The S&P 500 has now underperformed Treasury bills for over 13 years – even when recent market advance is included. If the S&P 500 indeed achieves a total return of 4.6% annually over the coming decade, those investors will have achieved a 23-year total return of just 3.2% annually. But even if the S&P 500 achieves a 10% annual return over the next decade, the 23-year total return for those investors would still only work out to 5.6% annually. When investors commit funds at rich valuations, the inevitable return to more normal valuations matters, and it matters for a very long time.
The most controllable determinants of investment returns are the level of valuation at which investors choose to initiate their investment and the level of valuation at which they choose to terminate their investment. Once you choose to initiate your investment at a rich level of valuation, you require a rich terminal valuation at some point in the future – and the good fortune to sell at that point – in order to achieve an acceptable long-term return. At present, rich valuations promise a very challenging decade for stock market investors, regardless of any fleeting short-term relief that monetary policy might provide.
Keep this in mind – when the market is deeply oversold and market internals are demonstrating positive divergences and recruiting favorable breadth, it can be sensible to accept market risk despite uncompelling valuations, as we did in early 2003. But speculating in a richly valued market where internals are showing increasing divergences, and the environment features an exhaustion syndrome and other historically dangerous conditions (see An Angry Army of Aunt Minnies) – is just begging for trouble.
Begging for Trouble
Investors remain so addicted to the temporary high of monetary intervention that they continue to ignore very real downturn in global economic indicators, to an extent that we have not seen since the 2007-2009 recession. This is particularly evident in the deterioration of new orders and order backlogs, which are short-leading indicators of production, which in turn is a short-leading indicator of employment.
Trading volume has been unusually low, while a 14-handle on the CBOE volatility index also suggests unusual complacency. It’s understandable that people are reluctant to place trades in a weakening economy, yet one where quantitative easing is widely expected. Wall Street is scared to death of being out of the market when the perceived salvation of QE3 is announced, and at the same time is increasingly encouraged by negative economic data in the belief that this will accelerate delivery. In short, investors are practically begging to be shot, mauled by dogs, and diced by a Veg-O-Matic so they can get their next fix of pain-killers.
The chart below shows the average standardized value (mean zero, unit variance) of the overall, new orders, and order backlogs components of numerous regional surveys from the Federal Reserve and the Institute of Supply Management (ISM). We observe the same sustained deterioration in economic data across the world, including Europe and China (where the absolute values are higher, but the standardized values are similarly bad). The overall pattern reflects what Lakshman Achuthan of ECRI often describes as the “three P’s” – pronounced, pervasive, and persistent. Those three P’s help to distinguish signals from noise. Presently, our own noise-reduction methods suggest that a global recession is at hand.
One problem with the widespread faith in QE3 is that quantitative easing has had very weak and temporary effects on real economic activity or employment. Regional Fed governors like Eric Rosengren (Boston), John Williams (San Francisco) and others have increasingly advocated another round of quantitative easing, feeling extreme pressure for the Fed to “do something” about the economy. But as I’ve asked before, suppose that Ben Bernanke announces that he is going to stop spitting watermelon seeds into a can. Should we all become concerned that the Fed is suddenly not doing enough to stimulate the economy? Well, only if you think that spitting watermelon seeds into a can is stimulative.
Unfortunately, the impact of QE has been almost exclusively restricted to marginal changes in interest rates that have little effect on economic activity, and provoking temporary speculative bouts in the financial markets. This ineffectiveness has been predictable, not only because of the very weak relationship between GDP growth and stock market changes (a 1% change in stock market value has historically been associated with just a 0.03-0.05% change in GDP), but also because – drumroll – with trillions of idle reserves already sloshing around in the banking system, QE doesn’t relax any constraint that is actually binding on the economy.
The typical effect of QE-induced speculative runs has been little more than to help the stock market recover the decline that it experienced over the prior 6-month period (see What if the Fed Throws a QE3 and Nobody Comes?). In effect, QE is a policy that has negligible effects on the real economy, and is effective only in suppressing spikes in risk premiums and supporting the stock market after hard declines. We should not be surprised if it turns out to be fairly ineffective in lowering risk premiums when they are already depressed, reducing interest rates that are already near record lows, or supporting stock prices that are already quite elevated. Needless to say, the Fed is virtually certain to initiate another round of QE3. But the fact that it is needless to say this should be of some concern, because it suggests that the intervention is already fully discounted.
The suspended animation of the market here is very reminiscent of the similar suspension that occurred in 2008, as the markets eagerly awaited the near-certain passage of the Troubled Assets Relief Program (TARP). If you recall, within one minute of the passage of that bill by the House of Representatives, the stock market entered a free fall. Buy the rumor, sell the news.
Given the spike in risk premiums across Spanish and Italian debt, it is clear that a round of massive bond purchases by the European Central Bank would come as quite a relief to those debt markets and the European stock market. So massive ECB purchases would almost certainly have greater short-run impact than another round of QE by the Fed. But ECB monetization of distressed European debt is a policy that is still vehemently opposed by stronger European countries, and even what has been done already dabbles at the very edge of German constitutional law.
I continue to expect that the Euro will eventually break apart, and that it would be least disruptive for the stronger countries (Germany, Finland, Holland, etc) to exit first, allowing the remaining countries to print money and depreciate the Euro as they desire. The reason is that existing contracts in Euro could still be honored, without the massive corporate and private defaults that would occur if peripheral countries had to revert back to their previous national currencies and yet have to honor contracts in a dramatically stronger currency.
In my view, it is unwise to dismiss the possibility that the stronger European countries will split off either into their pre-Euro currencies, or into a new common currency with a more restricted membership. That is essentially what the sovereign bond markets foreshadow. Government bonds in Finland, Germany, Holland and several other countries are presently sporting negative interest rates, with German yields reaching record negative levels just last week. As Ray Dalio of Bridgewater recently wrote, “we think that there are good reasons to doubt that European bank and sovereign deleveragings will be prevented from progressing to the next stage in a disorderly way, without a viable Plan B in place. This fat tail event must be considered a significant possibility.”
For the United States, the main force of policy here should be on measures to ensure that the financial system is as immunized as possible from deterioration in the European banking system. On that front, Reuters reported last week that major banks have been directed to develop plans in the case of a renewed credit crisis.
With regard to the preparation of the U.S. financial system, I remain skeptical, but am somewhat more hopeful than I was a few years ago. Part of the Dodd-Frank act was the creation of an Orderly Liquidation Authority (OLA) to resolve too-big-to fail banks (Systemically Important Financial Institutions or SIFIs). The objective is to preserve large financial firms as going concerns in the event of insolvency, while ensuring that shareholders and creditors bear all the losses and customers and depositors are protected. The mechanics: following receivership, a temporary bridge company would be created, the FDIC would write down the assets to market value, old equity would be written off, and liabilities would be transferred by seniority (senior secured debt first) until the bridge company had 10% equity. Remaining debt would be exchanged for equity in the new company.
The JP Morgan resolution plan provides a good example of how this would work. Notably, JP Morgan’s illustration suggests that an after-tax loss of $50 billion (just 2.2% of total assets) could be sufficient to take the company to insolvency, driving the company to a negative $16 billion equity position (h/t DailyBail). How could that happen? The example presented by JPM assumes two additional driving changes: a deposit run of 20%, which would be a substantial reduction in deposits, but certainly not unprecedented in other banking crises; and a $150 billion mark-down of asset values by the FDIC upon creation of the bridge company. Now, I’ve been quite critical of the 2009 FASB ruling that removed the need for banks to mark their assets to market, but a difference of $150 billion between the reported value of assets and the value that would be recognized in a reorganization? That would represent about 80% of the equity presently reported by JPM. One hopes that this figure has no relationship to reality.
Market Climate
As of last week, our estimates of prospective return/risk for stocks remained in the most negative 0.6% of historical observations, based on a blend of horizons from 2-weeks to 18-months. Strategic Growth remains fully hedged, with a “staggered strike” position that raises the strike prices of the put side of that hedge closer to market levels, presently representing about 1.6% of assets in time premium looking out toward year-end. Strategic International also remains fully hedged. Strategic Dividend Value is hedged at 50% of assets – it’s most defensive position. In Strategic Total Return, we used the spike in yields last week to very slightly increase the duration of the Fund to about 1.8 years. About 10% of assets remain in precious metals shares, with a few percent in utility shares and foreign currencies.
Copyright © Hussman Funds
Tags: Amp, Cash Flows, Central Bank Intervention, Corporate Profit, Daily Focus, Dalio, Earnings Estimates, Government Deficits, Hedges, Hussman, Hussman Funds, Implicit Assumption, Investment Climate, Material Change, Norms, Private Savings, Profit Margins, Shuffle, Target, Term Earnings, Term Investors, Valuations
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Sector Relative Strength: Defensives Topping
Friday, August 10th, 2012
The charts below show the relative strength of the ten S&P 500 sectors as well as the Dow Jones Transports and the Russell 2000 relative to the S&P 500 over the last year. When the line is rising it indicates that the sector is outperforming the S&P 500, while a falling line indicates underperformance. We have also shaded each sector in red or green to indicate whether the sector has outperformed (green) or underperformed (red) the S&P 500 over the last year.
As was the case the last time we looked at sector relative strength, over the last year six sectors have outperformed the S&P 500 while four have underperformed. One shift that we have seen in the last two weeks, however, is that some of the defensive sectors have started to underperform. Look at the charts below and you will see that Consumer Staples, Health Care, Telecom Services, and Utilities have all started to roll over to varying degrees. For Consumer Staples and Utilities, both sectors are close to dipping into the red in terms of relative performance over the last year. While defensives have seen slowing momentum, sectors picking up the slack include Energy, Industrials, and Technology.
Typically, when the market is in rally mode, you often see outperformance on the part of the Transports and Small Cap Stocks. In the current leg higher, however, both indices have been lagging, and both are underperfoming the S&P 500 by a considerable margin over the last year. In the case of the Russell 2000, the index has made a modest rebound over the last few days (post Knight Trading trade glitch), but it needs to string together another week or two of outperformance before we could confidently say that small caps are participating.
Copyright © Bespoke Investment Group
Tags: Amp, Consumer Staples, Dow Jones, Dow Jones Transports, Glitch, Industrials, Investment Group, Knight Trading, Last Time, Momentum, oil, Rally Mode, Rebound, Relative Performance, Relative Strength, Russell 2000, Sectors, Slack, Small Cap Stocks, Small Caps, Telecom Services
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Keep an Eye on May Stock Market Peaks, says Richard Russell
Thursday, August 9th, 2012
Richard Russell, 88-year-old writer of the Dow Theory Letters, called a bear market for U.S. stocks a few months ago. An update on his latest thinking is reported below.
Question: Richard, everybody has emotions. So where are your emotions regarding this market? From an emotional standpoint, be honest, are you really bullish or bearish?
Answer: If the Averages confirm that this is truly a bear market, I’ll have mixed emotions. On the one hand I will have been proven right on my bear market call, and that will be a boost to my ego. But I can’t say I’d be happy we’re in a primary bear market.
But if the Averages close above their May peaks, and all my charts point to a bull market, I’ll have been proven wrong on my bear market call, and that will be a bruise to my ego.
Source: StockCharts.com
Nevertheless, I’d much rather be living through a bull market than a bear market – a bull market would be far better for me and my kids and for my business. So call it strange, but from an emotional standpoint I’d prefer to have been wrong on my bear market call, and I’d prefer that we’re in a re-confirmed bull market.
Therefore, instead of confusing my subscribers with a lot of ego-boosting baloney, I’m just going to call this market the way I see it, being as honest and unemotional as I can possibly be.
If we are truly in a primary bear market, I have an intuition that it could turn out to be the worst bear market in history – and that’s another reason why I secretly hope I have been wrong on my bear market call.
Another intuition – we will know the final answer as to whether we’re in a bull or bear market by October.
[PduP: Yesterday's closing levels of the benchmark U.S. indices were within reach of the May peaks: Dow Jones Industrial Average – 13,176 vs 13,279 and S&P 500 Index – 1,402 vs 1,419.]
Source: Dow Theory Letters, August 7, 2012.
Tags: Amp, August 7, Baloney, Bear Market, Bruise, Dow Jones, Dow Jones Industrial, Dow Jones Industrial Average, Dow Theory Letters, Ego, Final Answer, Intuition, Mixed Emotions, Richard Russell, Standpoint, Stock Market, Stocks, Strange, Subscribers
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U.S. stock market – long-term indicators favor bulls
Tuesday, August 7th, 2012
I published a post yesterday on the short-term technical outlook of the U.S. benchmark S&P 500 Index (SPX 1401.35 ‘0.51%), referring to conflicting indicators but stating that the rally could have more legs. When the message of the short-term charts is murky, it is often useful also to consult long-term indicators to provide some guidance.
Let’s consider, by means of example, monthly data for the S&P 500. A simple 12-month rate of change, or ROC, indicator seems to pick up the major turning points quite well. Let me say straightaway that monthly indicators are of little help when it comes to market timing, but they do come in handy for defining the primary trend. The ROC line below zero depicted bear trends quite clearly, as in 1990 (not shown), 1994, 2000 to 2003, and from 2007 to March 2009. Right now, the ROC line is “safely” in positive territory after threatening to breach the zero line in June.
The combination of a series of higher lows (i.e. rising bottoms) and positive longer-term momentum probably gives the bulls the benefit of the doubt, but needless to say I will be watching this space quite closely.
Source: StockCharts.com
Tags: Amp, Benchmark, Benefit Of The Doubt, Bottoms, Bulls, Guidance, Legs, Lows, Market Timing, Momentum, Rally, Spx, Technical Outlook, Term Charts, Term Indicators, U S Stock Market, Zero Line
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Technical Talk: Upside breakout for S&P?
Sunday, August 5th, 2012
The comments below were provided by Kevin Lane of Fusion IQ.
As seen in the chart below the S&P 500 Index (SPX 1390.99 ‘1.90%) held its 100-day moving average yesterday (green line) near 1,350 and today is bouncing on ECB news and better-than-expected-non-farm payrolls – does anyone smell election year mark-ups? That said, the Index is still setting higher lows since its June low, which is bullish; however it has also been capped near the 1,385 area (red line) for a while now. The Index continues to remain locked in a range, with resistance at 1,385, and near-term support at 1,350. [PduP: The closing level on Friday was 1,391.] Whichever way it breaks, momentum will surely follow. More meaningful support lies near the 1,330 – 1,325 band (purple-shaded lines and arrows) as this was the area where the S&P 500 double-bottomed recently. This is the area that is most critical in regard to keeping the market together.
There are conflicting data that could support a breakout (i.e. more consistent levels of news highs, low long exposure levels and low levels of bullish sentiment) or a breakdown (i.e. weak action in cyclicals and transports, especially truckers). However, if forced to choose, we are leaning towards an upside breakout. That said, we won’t be ashamed to pull the rip cord if key supports are broken as this would take the breakout call off the table. After all, being wrong once in a while is inevitable, however, ignoring an oncoming truck (i.e. a break of support) assuming you can swerve around it, is never a smart strategy!
This game is about knowing when to press forward, when to sit tight and watch, when to retreat and, most important, knowing when to change strategies if need be!
Source: Source: Kevin Lane, Fusion IQ, August 3, 2012.
Tags: Amp, Arrows, Bullish Sentiment, Consistent Levels, Cyclicals, Election Year, Exposure Levels, Iq, Lows, Mark Ups, Meaningful Support, Momentum, Non Farm Payrolls, Red Line, Rip Cord, Smart Strategy, Spx, Transports, Truckers, Ups
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Can it Really Be That Easy?
Monday, July 30th, 2012
Throughout the year in reports to our Bespoke Premium clients, we have highlighted the similarities between this year and prior Presidential Election years numerous times. Most recently, in early July we noted the fact that based on the historical pattern the S&P 500 could see a modest pullback in mid-July coinciding with the kick-off of earnings season. Sure enough, the market saw some choppiness about a week and a half ago and subsequently rebounded in the middle of last week. Holding to the historical pattern, that rebound came right at the same time that the market historically sees its summer low.
If the pattern continues, the S&P 500 could be set up for a nice rally to end the Summer. Will it hold? Only time will tell, but if the historical pattern has worked so far, what’s to stop it from continuing?
Tags: Amp, Choppiness, Earnings Season, Investment Group, Nbsp, Presidential Election, Pullback, Rally, Rebound
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