Posts Tagged ‘Barometer’
Friday, May 4th, 2012
The bar chart below, courtesy of Scott Barber of Reuters, shows the monthly performances of the principal asset classes.
“The “risk on/risk off” barometer moved back in the direction of “risk off” during April, as U.S. 10-year Treasury securities turned in the best investment gains (in U.S. dollar terms) during the month,” said Barber. “The 2.8% jump in the value of the Treasury securities came despite the almost universal perspective on the part of professional investors that the 30-year bull market for bonds is finally sputtering to a halt and that eventually interest rates will begin to climb. Investors displayed a clear bias in favor of assets that not only generated income but also offered them security – in other words, bonds of various kinds were the only major asset classes to end the month in the black.”
Source: Scott Barber, Reuters, May 2, 2012.
Tags: 10 Year Treasury, April, asset class, Asset Classes, Assets, Barometer, Bias, Bonds, Class Performance, Dollar Terms, interest rates, Investment Gains, Principal, Professional Investors, Reuters, risk, Scott Barber, Treasury Securities, Universal Perspective
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Saturday, February 11th, 2012
While I knew PIMCO was massively influential during the financial crisis, I did not realize a mutual fund shop could potentially be thrown in with banks as “systematically important” institutions. But considering just how many bonds they own, I guess it makes sense. Obviously, Mr. Gross is not happy with this potential situation, as it would come with more cost and oversight.
But if push comes to shove and there is some sort of bond disaster down the road, I am sure the Fed would just do QE8 and target all PIMCO’s portfolio.
Lengthy story but some snippets below via Reuters:
- He is the man who made bond investing sort of sexy – and now he may pay the price. Over more than three decades, Bill Gross, co-founder of asset-management giant PIMCO, has made so much money for clients that he has become the barometer by which other bond traders are judged. His West Coast perch, prescient calls on the U.S. economy and devotion to yoga only added to the mystique.
- But the very recipe that enabled Gross to dominate his industry may now be conspiring against him. He’s coming off his worst year in the business after making a huge bet against U.S. Treasuries that backfired. Last year, for the first time in nearly two decades, investors pulled more money out of PIMCO’s flagship fund than they put in.
- More troubling, U.S. regulators are now considering whether PIMCO should be deemed a “systemically important financial institution” – that is, too big to fail, and thus subject to tighter regulatory oversight. The concern: The juggernaut manages so much money for pension funds that it could hammer the economy if it ever went under. The firm has doubled in size to $1.36 trillion in assets since the collapse of Lehman Brothers in 2008.
- The firm is lobbying hard to fend off the “systemically important” designation, according to regulatory disclosures. Like other financial firms, it also objects to impending rules that could make some of its derivatives trading more costly.
- Industry analysts also wonder whether PIMCO’s $250 billion Total Return Fund, the world’s largest bond fund, is such a behemoth that Gross sometimes has to swing for the fences to generate the kind of returns investors have come to expect. Because PIMCO’s flagship fund relies heavily on derivatives to bet on bonds, some analysts say it’s unnecessarily complex and potentially at risk should one of its trading parties fail.
- Gross dismisses concerns about PIMCO’s girth. He says the firm isn’t “levered,” or making bets with borrowed money, in the way that failed players like Bear Stearns or Lehman Brothers did. The asset manager is using only client money to trade. ”It’s not like we are a deposit institution and there’d necessarily be a run on the bank because they thought the bank was going to fail,” Gross said in an interview. “‘Too big to fail’ is dependent upon tens of thousands of clients” abandoning ship at once, and it’s “hard to believe they’d want out at the same time.”
- The debate over PIMCO’s centrality to the financial establishment is a turnabout: Up until the financial crisis, the 67-year-old Gross was largely seen on Wall Street as a West Coast outsider and a bit of a loner. But during the crisis, scared investors piled into his funds. Policymakers from the Federal Reserve and Treasury Department turned to PIMCO to help with a raft of programs meant to rescue the financial system. That helped forge closer ties between the firm and the government and raised PIMCO’s profile even more with investors.
- “The concentration of bond-market assets in a few firms, which some could argue to be systematically risky, is not of those firms’ design, but rather stems from their success,” says Joshua Rosner, managing director of Graham Fisher & Co., an adviser to institutional investors.
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
Tags: Barometer, Bill Gross, Bond Traders, Co Founder, Financial Crisis, Financial Institution, Flagship, Gross Co, Juggernaut, Lehman Brothers, Lengthy Story, More Than Three Decades, Mutual Fund, Mystique, Pension Funds, Regulatory Oversight, Reuters, Snippets, Target, Treasuries
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Thursday, January 12th, 2012
The January Barometer
by Jeffrey Saut, Chief Investment Strategist, Raymond James
January 9, 2012
It’s that time of year again when the media is abuzz with that old stock market saying, “so goes the first week of the new year, so goes the month and so goes the year.” Admittedly, the January Barometer has a pretty good track record. To wit, according to the Stock Trader’s Almanac (as paraphrased by me):
Devised by Yale Hirsch in 1972, our January Barometer states that as the S&P 500 goes in January, so goes the year. The indicator has registered only seven major errors since 1950 for an 88.5% accuracy ratio. . . . Including the seven flat-year (minor) errors (less than +/- 5%) yields a 77.0% accuracy ratio.
The Hirsch organization also notes:
The last 38 up First Five Days (of the new year) were followed by full-year gains 33 times for an 86.8% accuracy ratio and a 13.9% average gain in all 38 years. … Every down January on the S&P 500 since 1950, without exception, preceded a new or extended bear market, a flat market, or a 10% correction.
Now given that historically the equity markets have a bullish tilt 67% of the time, the first week of the new year typically gives the January Barometer a bullish start for the month. This year is no exception with the first four sessions of the year lifting the S&P 500 (SPX/1277.81) 20.21 points, or 1.61%. However, 1.55% of last week’s rally occurred on Tuesday when the SPX vaulted 19.46 points. Subsequently, as stated in that morning’s verbal strategy comments:
“That said, the NYSE McClellan Oscillator is short-term overbought and the stock market’s internal energy has not yet been fully recharged. Accordingly, it would not surprise me to see a pullback. … Consequently, I would not chase the dragon right here since I anticipate an upside-blow off is due.”
To be sure, Tuesday’s Triumph certainly felt like an upside blow-off with the D-J Industrials (INDU/12359.92) tagging 12479.65 intraday before surrendering 83 of those points into the closing bell. That action left the senior index struggling for the balance of the week as it closed roughly 120 points below Tuesday’s session high. Still, the first week of the new year was “up,” causing one Wall Street wag to chant, “so goes the first week of the new year, so goes the month and so goes the year.” Yet, there is one indicator that I give more credence than the January Barometer.
Back in the early 1970s, when I was working on Wall Street, I encountered a man who became my friend and one of my mentors. At that time Lucien Hooper, then in his 70s, was considered one of the savviest “players” in this business, as well as the second longest contributing editor to Forbes magazine. While known for many market axioms and insights, the one that stuck with me the most was Lucien’s December Low Indicator. It seems as if only yesterday we were sitting at Harry’s at the Amex having lunch when he explained it. “Jeff,” he began, “Forget all the noise you hear about the January Barometer. That being, ‘so goes the first week of the new year, so goes the month and so goes the year.’ Institutions can manipulate prices for a short period of time, especially during a holiday-shortened week with a limited audience. Consequently, pay much more attention to the December low. That would be the lowest closing price for the INDU during the month of December. If that low is violated during the first quarter of the New Year, watch out!”
For the record, the Dow’s closing low in December was 11766.26, recorded on 12/19/11. “Circle” that low and watch it closely during the first quarter of 2012. If the Industrials travel below that low then respect Lucien’s “watch out” warning, for it has proven prescient since in all but two instances since 1952 when the December low was violated during the first quarter the Dow slid another 11% on average. Importantly, if the December low is not breached in the 1Q, heed the January Barometer since when taken in conjunction with the December Low Indicator it has been right nearly 100% of the time.
So, other than the first week of the January Barometer, what else happened last week? Well beginning with the technicals, both the INDU and the D-J Transports made new closing reaction “highs.” There was a “Golden Cross” when the Dow’s 50-day moving average (DMA) crossed above the Dow’s 200-DMA. And, that action broke the Dow above what a technical analyst would term the “neckline” of a bullish reverse head-and-shoulders chart pattern. Moreover, Last Tuesday’s upside gap in the S&P 500’s futures chart was “closed” on Thursday (read: bullish) as participants continued to buy the dips. Nevertheless, I am sticking with my short-term cautionary “call” because the stock market is still overbought in the near-term and a lot of internal energy has been used up in the ~10% rally that began around Thanksgiving. Additionally, there was every reason for stocks to rally on Friday’s positive jobs report, but instead there was little reaction.
As for the week’s fundamentals, of the 16 economic reports 10 beat expectation, five were below estimates, and one was in line. Plainly, the employment numbers improved and the ISM Manufacturing report rose to its highest level since June. China’s Manufacturing PMI rose while its PMI Services Index jumped above 50, German unemployment fell, Euro zone’s CPI moderated, and the Euro basis swap eased. On the negative side, our ISM Services report was below estimates, refi applications declined by 2.5% with purchases down 9.6% despite lower mortgage rates, December retail sales were a touch “light,” and UniCredit (one of Italy’s largest financial institutions) stock collapsed 38.6%, heightening fears about Euroquake.
Speaking of share price collapses, Acme Packet’s (APKT/$26.58/Strong Buy) stock has collapsed from last May’s high of $84.50 into last week’s $25.20 intraday low punctuated by a disappointing earnings preannouncement. Our fundamental analyst (Todd Koffman) has been negative on APKT since initiating research coverage on May 23, 2011. On last week’s announcement the shares gapped lower, causing Todd to raise his rating to a Strong Buy with these comments:
“We are upgrading Acme Packet to Strong Buy from Underperform. Our upgrade is based on our view that wireline VoIP (voice over the internet) is in the early innings and wireless VoIP has yet to start. While the company has had a number of missteps, we believe incumbent telcos are transitioning from circuit switched voice to native voice over IP. The U.S. is leading the charge. Line data is difficult to come by, but our estimates suggest less than 10 million of the 60 million business phone lines (U.S. only) have converted from legacy circuit switched voice to native voice over IP. We note, international markets are even further behind. Recent missteps reflect exaggerated expectations complicated by unusual buying patterns. We believe these potholes will temper management expectations and provide a realistic base for future growth. Further, we expect Verizon (VZ/$38.33/Market Perform) and AT&T (T/$29.68/Market Perform) to deploy wireless VoIP using Acme session border control capacity in late 2012.”
For further information, see our January 5, 2012 upgrade report on APKT.
The call for this week: It’s pretty amazing that the equity markets have rallied in light of the super strong U.S. dollar. That action suggests that stocks are not quite ready for the pullback I have been expecting following last Tuesday’s upside blow off. Still, while the Dow Industrials and Dow Transports have tagged new reaction highs, the SPX and NDX have not. Such divergences always leave me in a cautious mode, especially since we are past the seasonally sweet spot for stocks. At some point we are going to get a profit-taking event, whether it is from last Tuesday’s intraday high (1284.62 SPX) or the 1300 – 1320 overhead resistance zone remains to be seen. Until that pullback occurs there just isn’t a whole lot to do on a trading basis.
Copyright © Raymond James
Tags: Barometer, Bear Market, Chief Investment Strategist, Days Of The New, Hirsch Organization, Industrials, Internal Energy, Intraday, jeffrey saut, Mcclellan Oscillator, New Year, Nyse, Pullback, Raymond James, Spx, Stock Market, Stock Trader, Tilt, Time Of Year, Yale Hirsch
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Monday, October 17th, 2011
by Dian Chu, market analyst, trader and author of the EconMatters blog.
The whole idea of going to University and studying Economics, replete with a thorough understanding of the importance of analyzing economic data points seems to be lost on these Rock Star Economists who dominate the financial media landscape these days. The only barometer these so called economists utilize is: “Oh, the stock market has been selling off hard for two weeks we must be in a recession”!
Here is an EconMatters’ quick overview on how markets work:
Investors/traders push markets up for as high as they will go, and then when they believe that the upside is pretty limited, then they sell, and shorts come in and piggy back on this selling, and both these factors serve to push markets down (this time as far down as they will go).
This occurs in markets quite regularly and when there is no long term impetus like a roaring economy, or an inflation generated asset program like QE2 in place, assets trade up and down in ranges, cycles if you will, as the business of trading takes place.
This trading volatility has very little to do with how the actual economy is performing, it is trading for the sake of trading. After all, markets could probably get by with only being open once a week, and four to six times a month ( a couple of days for important events) if it wasn`t for the business of trading.
Do you think markets need to be open 6 days a week practically 24 hours a day (with futures and currencies) from a strictly economic analysis standpoint? Well, they don`t, and this is where the whole business that has been built up around the financial markets comes into play.
The financial markets are big business, and economists need to recognize that market generated volatility needs to be largely disconnected from their analysis of the economy. It seems that some of these economists use the financial markets as their only indicator of economic health.
The reason this is problematic for economic analysis is obvious; however, the derivative fallout from this type of practice is equally troublesome. The scenario goes something like this:
Investors take profits, and selling occurs and the markets start going down, short sellers come in and add to the selling. In addition, the financial media reports a lot of negative stories on the economy and markets solely because the markets are going down. This scares more investors to sell, causing markets to go down even further. The cycle continues triggering additional program selling and portfolio stops along the way.
Financial markets continue to go down even further, and some funds are forced to liquidate positions they are perfectly happy with because of margin calls or portfolio losses in other areas. This self-fulfilling cycle of selling causes markets to go down even further, (this is why you often get markets to go directionally much higher or lower than an investor can ever imagine). All this Trading activity can and does occur on a regular basis and has absolutely nothing to do with the economy.
So if economists are looking at the stock market as a key indicator, and markets can fall a whole bunch with the economy being in the same exact condition when they were 25% higher, and economists were talking about ‘Green Shoots’! Then these economists are not only going to be mistaken in their analysis, but when they look at the falling markets, and publicly state that the economy is in a recession, the financial media love to interview them as “Credible Analysts” which only serves to further perpetuate the doom and gloom in the markets, causing an even greater distortion of the underlying economic reality.
The short sellers love this entire paradigm, it serves their purpose quite nicely, but it sure doesn`t help businesses who don`t understand the “Game of Financial Markets” to feel confident about the economy, and engage in robust hiring practices.
Businesses need Economists to be actual economists and be as objective as possible so that they can make business decisions based upon sound economic analysis, (it would be helpful if the financial media then Reported these economic facts), as a natural hedge or check and balance against the financial incentives of the strictly market based participants who are merely trading on volatility.
Here is how the scenario always ends:
All the profit taking has occurred, assets have been pushed down as far as they can go where Traders/Investors realize they can make a lot of money by buying right here, this forces the shorts to cover. Markets go on a nice rally, and then the economists all the sudden have a much brighter forecast for how the economy is performing, and where it is likely headed. The financial media chirps in with, “Gee maybe the economy is just growing slowly, instead of the End of the World Recession that we reported on last week!”
These cycles are ridiculous from an analysis standpoint, and this is where the role that economists are supposed to play comes into the picture and is much needed by businesses and even financial markets themselves, to cut through the media hype with an analysis of the underlying fundamentals of the economy, the actual economic data put in the overall proper context relative to other economic data sets, i.e., what is the trend, historical comparisons, important economic weights, etc.
Economists are supposed to be the rational, logical, analytical, objective source for how the economy is actually performing. What does the economic data say? How should businesses interpret the economic data? We realize it is much harder than just looking at the market activity for the past month and concluding that the economy is in a recession.
However, there is no value-added in that type of analysis, I can get that kind of information from a stockbroker or a cab driver for that matter. The academic rigor of economic research is what separates the economist and provides credibility versus the directional biased market pundit pushing a position. These days the differences between the two are becoming harder to discern in the age of Rock Star Economists.
In short, economists need to get back to being actual economists and not market directional cheerleaders; we have enough of those already in financial markets talking their respective books!
Source: Dian Chu, EconMatters, October 16, 2011.
Tags: Asset Program, Barometer, Dian, Economic Analysis, Economic Data, Economic Health, Economists, Financial Markets, Impetus, Important Events, Market Analyst, Media Landscape, Pitfall, Place Assets, Qe2, Recession, Rock Star, Six Times, Stock Market, Volatility
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Thursday, January 27th, 2011
by Adam Hewison, CEO, Seasoned Trader, MarketClub/INO.com
The question many investors are asking themselves today is, just what happened to the price of gold?
Did the world change? Did the problems in Europe go away? Did all the states manage to find funding to cover their deficits?
No, none of that happened, but gold still dropped $100.
It’s all about market perception and timing, two things we’ve talked about many times before on the Trader’s Blog. I don’t know about you, but I remember when gold was over $1,400 an ounce and all I could see on TV where ads from gold companies extolling the virtues of buying gold as it is real money. Since the fall, I expect we’ll see fewer of these advertisements on TV and in print.
So what did happen to gold?
Well, for starters there were some key technical levels broken. If you’re a gold trader, but not a technical trader, you really need to learn how to read charts and see what other traders are doing.
Secondly, there did not appear to be any other news to drive this market higher. When that happens, markets tend to fall under their own weight, and as many retail investors purchased gold, there was nobody on the other side of the market to support gold.So the question is, is the move over in gold? That’s a tricky one. I want to show you in today’s video exactly how we’re looking at this very emotional market. Every time we have created a video indicating that there would be some pullback in gold, we were bombarded by the gold bugs saying that we’re crazy. When you see a market pullback as much as gold has, you have to have some respect for the market itself.
If we look at the price of gold today at approximately $1,330, it pretty much equates to what happened in the last 30 years when gold was trading at a high of $850 an ounce. If you factor in inflation over the last 30 years, gold is probably lower now than it was 30 years ago. So how good an investment is gold? I think gold is more of a barometer of fear than anything else. Clearly there are other investments in the marketplace that have better returns.
Let’s get back to gold and what we think will happen. In this short video we analyze the market using our “Trade Triangles,” the Williams%R, and the MACD indicator.
I think there’s an important takeaway message in this video – what goes up, must come down.
Enjoy the video.
If the video does not play here, you can also watch it here.
All the best,
President of INO.com
Co-founder of MarketClub
Tags: Advertisements, Barometer, Buying Gold, Ceo, Collapse, Fear, Gold, Gold Bugs, Gold Companies, Gold Trading, inflation, Investment, Market Perception, Ounce, Price Of Gold, Pullback, Real Money, Retail Investors, Starters, Technical Trader, Virtues
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Tuesday, June 15th, 2010
This article is a guest contribution by David Rosenberg, Chief Market Economist, Gluskin Sheff.
The smoothed ECRI leading economic index fell in the opening week in June for the fifth week in a row and now down in nine of the past ten. The index, went from +0.3% to -3.5%, the weakest it has been in a year. After predicting the V-shaped recovery we got briefly in the inventory-led GDP data when the index soared off the bottom in late 2008, at -3.5%, we can safely say that this barometer is now signalling an 80% chance of a double-dip recession. It is one thing to slip to or fractionally below the zero line, but a -3.5% reading has only sent off two head-fakes in the past, while accurately foreshadowing seven recessions — with a three month lag. Keep your eye on the -10 threshold, for at that level, the economy has gone into recession … only 100% of the time (42 years of data).
Suffice it to say, when the ECRI was drifting lower in 2007, it got to -3.5%, where are we are now, in November and unbeknownst to the consensus at the time that a recession was only one month away. Remember that the economics community did not call for recession until after Lehman collapsed — nine months after it started; and go back to 2001, and the consensus did not call for recession until after 9/11 and again the economy had been in recession for a good six months). We should probably point out here that real M3 has contracted at the fastest rate since the early 1930s, as John Williams has published, and declines in the broad money measured has foreshadowed every recession in the past seven decades.
To be sure, the Fed has not raised rates and the yield curve is steep but there has been a visible tightening in financial market conditions that poses a significant risk for what has been a very fragile recovery in dire need of recurring rounds of policy stimulus. The widening in credit spreads and decline in the stock market represent a sizeable increase in the debt and equity cost of capital. The Fed has stopped expanding its balance sheet (and now we have Fed presidents Hoenig clamoring for rate hikes and Plosser for reducing the size of the Fed’s balance sheet) and end of the housing tax credits implies a major withdrawal of federal government support at a time when restraint is accelerating at the State and local levels (the States have a $127.4 billion aggregate deficit to close for the fiscal year beginning July 1st so right there we have a one-percentage point drag on baseline GDP growth).
The data suggest that we are now seeing the consumer sputter with what looks like a very weak handoff into the third quarter. The housing sector is collapsing again. The export-import data are pointing to a sudden deceleration in two-way trade flows. Commercial real estate is dead in the water. Bank credit is in freefall right now (down 0.3% or $32 billion in the first week of June — the third decline in a row and has now contracted in six of the past seven weeks and at an 11% annual rate. In the last three weeks, bank credit has contracted a total of $119bln, which is the steepest decline since the week of November 19, 2008 when the economy was deep in recession.
There is still something left in the tank as far as capex and inventory investment is concerned, but by the fourth quarter, we could well be looking at a flat or even negative GDP print. This is exactly what happened in the second half of 2002, when by the end of the year real GDP converged in real final sales near the 0% mark after a sharp but truncated mini-inventory cycle. That may not have been classified as a double-dip recession, but it was a growth collapse nonetheless — an aborted recovery for a consensus that went into the second half of that year, much like this one, with a consensus forecast of 3% real economic growth. The lesson, is that expectations had surpassed reality to such an extent that it didn’t even take another recession to take the equity market down to new lows, which happened in October 2002 (not October 2001!), fully 11 months after the downturn officially ended.
Not only are the economists calling for 3% real growth, which would imply something close to 4-5% nominal GDP growth, but the consensus among equity analysts is that we will end up seeing over 30% operating EPS growth to a new high of $95.59 for 2011. But there are a couple of points worth making here. The bottom-up crowd is never that good at predicting where profits are going to be heading at the best of times, but at turning points in the economy it is awful — overestimating earnings by an average of nearly 20%. So we could easily be closer to $75 for next year’s EPS than $95. And, even $75 may be a stretch when you consider that there is not a snowball’s chance in hell that we are going to see earnings outstrip nominal GDP by a factor of six in the coming year. This type of earnings is always possible at the trough in profit margins, but we are coming off the third highest level on record — coming off the trough, historically, corporate earnings jump 17% the next year. At the peak, profits actually tend to decline 6% in the ensuing 12 months — imagine what that number becomes when you come off peak margins and head into a recession at the same time. It’s not a pretty picture.
Tags: Barometer, Chief Market, Credit Spreads, David Rosenberg, Double Dip Recession, Economic Index, Economics Community, Ecri, Equity Co, Fragile Recovery, Gdp Data, Gluskin Sheff, Head Fakes, John Williams, Lehman, Market Economist, Recessions, Stimulus, Yield Curve, Zero Line
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Thursday, May 27th, 2010
The current U.S. economic rebound remains sub-par, as clearly seen in the chart below, courtesy of Goldman Sachs (via Clusterstock – Business Insider). As indicated by the blue line, a great deal of improvement still needs to take place to catch up with previous recoveries, especially again to see employment gains like we experienced in 1954–1982.
Source: Clusterstock – Business Insider, May 26, 2010.
Confirming the true nature of the upswing, individual income taxes collected by the U.S. Treasury are at multi-year lows through the first four months of 2010 (see chart below). From their peak in 2008, personal income tax receipts have fallen by $232.1 billion, or 24.6%. As highlighted by Casey’s Daily Dispatch, “this is a good barometer of overall economic health and income growth. Lower national tax receipts mean lower national income, and without income growth a solid economic recovery will be hard to achieve.”
Source: Casey’s Daily Dispatch, May 26, 2010.
Tags: Barometer, Business Insider, Casey, Current, Daily Dispatch, Economic Health, Economic Rebound, Economic Recovery, Employment Gains, Four Months, Gold, Goldman Sachs, Income Tax Receipts, Individual Income Taxes, Lows, Par, Personal Income Tax, True Nature, U S Treasury, Upswing
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Saturday, January 30th, 2010
An old stock market saw tells us if the month of January is higher, there is a good chance the year will end higher, i.e. the so-called “January Barometer”. On the other hand, every down-January since 1950 has been followed by a new or continuing bear market or a flat year. “As January goes, so goes the year,” said Jeffrey Hirsch (Stock Trader’s Almanac).
The result for January is in, and it is not a good one: The Dow Jones Industrial Index closed 3.5% down on the month and the S&P 500 Index 3.7% lower.
Also, according to Hirsch, the “December Low Indicator” says that should the Dow Jones Industrial Index close below its December low anytime during the first quarter, it is frequently an excellent warning sign. The key number to watch was the low of 10,286 (December – now history with the Dow down to 10,067.
Although this is not particularly scientific research, it is clear we are not seeing a good start to 2010 and should at least be mindful of these indicators.
Considering the short-term technical picture of the Nasdaq Composite Index, Adam Hewison (INO.com) provides a short analysis showing a rather negative downside break. Click here to access the presentation. (He also recently analyzed the Dow Jones Industrial Index and the S&P 500 Index. Click here and here.)
Tags: Almanac, Barometer, Bear Market, Dow Jones, Dow Jones Industrial, Dow Jones Industrial Index, Downside, First Quarter, Good Chance, Jeffrey Hirsch, Key Number, Month Of January, Nasdaq Composite Index, New Year, Progress Report, Stock Market, Stock Trader, Warning Sign, Year End
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Friday, December 25th, 2009
If Santa has not yet made his way to your investment portfolio, don’t despair. According to Jeffrey Hirsch (Stock Trader’s Almanac), the “Santa Claus Rally” normally occurs during the last five trading days of a year and the ensuing first two trading sessions of the new year. During this seven-day period stocks historically tend to advance (by 1.5% on average since 1950), but when recording a loss, they frequently trade much lower in the new year. Well, yesterday marked the official beginning of the Santa Claus Rally period, with the Dow Jones Industrial Index off to a 0.5% start.
Another old stock market saw tells us the first five trading days of January sets the course for January (known as the “First Five Days Early Warning System”), and if the month of January is higher, there is a good chance the year will end higher, i.e. the so-called “January Barometer”. Every down January since 1950 has been followed by a new or continuing bear market or a flat year. “As January goes, so goes the year,” said Hirsch.
Lastly, according to Hirsch, the “December Low Indicator“ says that should the Dow Jones Industrial Index close below its December low anytime during the first quarter, it is frequently an excellent warning sign of lower levels ahead. The number to watch is the low of 10,286 recorded by the Dow on December 8.
Time will tell whether the year-end/new-year indicators play out according to the historical pattern. Meanwhile, we’ll have some fun tracking how it pans out.
Tags: Barometer, Bear Market, December 8, Despair, Dow Jones, Dow Jones Industrial, Dow Jones Industrial Index, Early Warning System, First Quarter, Good Chance, Investment Portfolio, Jeffrey Hirsch, Month Of January, New Year, Santa Claus, Stock Market, Stock Trader, Trading Sessions, Warning Sign, Year End
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