Posts Tagged ‘Nyse Stocks’

Ryan Lewenza: Investment Outlook (January 27, 2012)

Tuesday, January 31st, 2012

Look to Increase Equity Exposure Following an Expected Near-Term Pullback

by Ryan Lewenza, VP, Senior U.S. Equity Analyst, TD Waterhouse

January 27, 2012

TD’s (TD Waterhouse) Ryan Lewenza has just released (late last week) his U.S. Equity Strategy team’s strategy report. In it he/they detail their case for increasing equity exposure following their call for a near-term pullback.

Highlights
- With the S&P 500 Index (S&P 500) up 5.5% since the beginning of the year and over 20% since its October 2011 low, the U.S. equity market looks technically overbought, and susceptible to some near-term profit taking, in our view. In determining whether the equity markets are overbought/oversold we look at a number of technical indicators, which at present, are painting a rather clear picture of a stretched and overbought market. While we see the potential for some near-term pressure over the next few weeks, we believe investors should take advantage of the potential weakness and look to add to their equity exposure, given an improving U.S. economy and the recent liquidity injection from the European Central Bank.

- One of our preferred market indicators in isolating extreme overbought/oversold market conditions is the percentage of New York Stock Exchange (NYSE) stocks above their 50-day moving average. Generally, when this indicator is above 80, it indicates an overbought market, and oversold when below 20. Currently, this indicator stands at 87, a level last seen in late October 2011, and just before the S&P 500 corrected 10% over the following month.

- After hitting an economic soft patch last summer, the U.S economy has shown some resiliency, especially in light of the headwinds emanating from Europe. ISM manufacturing has ticked higher recently, and with the sub-component New Order Index surging in recent months (57.6 in December, up from 49 in summer 2011), we believe there may be more upside for the ISM index over the next few months, which if correct, could continue to support a higher stock market.

- With the recent strength in the U.S. economy and stock market we are tweaking our sector recommendations, by adding some cyclicality to our investment strategy. In particular, we are downgrading utilities from overweight to market weight, and upgrading the materials sector from underweight to market weight.

- While we are downgrading utilities, we still believe investors should have some exposure to the sector, given their defensive qualities and high dividend yields. One name that stands out is Exelon Corp. (EXC-N). Exelon is one of the largest utility companies in the U.S. and is the country’s largest nuclear operator.

You can read/download Ryan Lewenza’s report in full, in the slidedeck below; Fullscreen for the larger read:

U.S. Equity Strategy (Look to Increase Equity Exposure Following an Expected Near-Term Pullback) – Janaury …

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Stock Price Correction Mostly Played Out, But Duration Could Go Longer (BCA)

Wednesday, June 29th, 2011

In the context of this macro-economic climate, BCA Research says that investors will need to become more tactically involved in asset allocation, than they needed to be during the initial period of the equity rally, and that technical signals will become very important as far as the timing of moves is concerned.

BCA’s U.S. Equity Strategy service has watched numerous key technical measures during the current correction. It appears sentiment has retraced back to levels that indicate previous bull market troughs. More NYSE stocks are currently reaching new lows than highs, indicating that selling or ‘distribution’ pressure is advancing.

BCA has two proprietary indices, the Intermediate Equity Indicator, and the Capitulation Index, and both have dropped sharply and are getting close to neutral territory. In past corrections, both of these slipped slightly into negative territory by the time broader markets hit the floor.

According to BCA, when you combine these technical signals, what shines through is that the bulk of the corrective phase may be over as far as magnitude, though none of these indicators has been fully played out, especially if you consider the VIX has yet to ‘spike.’

In conclusion, BCA says that while the market has already experienced an advanced correction, where price is concerned, its duration still has room to run.

Copyright © BCA Research

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S&P 500 – the “soldiers are deserting,” says Richard Russell

Friday, May 20th, 2011

Where breadth goes, the market usually follows,” goes an old market saying. Breadth indicators are useful tools to assess the inner workings of the market’s rallies or corrections, and are used to identify strength or weakness behind market moves, i.e. to assess how the bulls and the bears are exerting themselves.

Let’s consider one measure of stock market “internals”: The number of NYSE stocks trading above their respective 50-day moving averages has declined to 55% from more than 75% at the end of April (see top section of chart below). In order to be bullish about the secondary or intermediate trend, one would expect the majority of stocks to trade comfortable above the 50-day line. Although the indicator is back above 50 after a dip below this level a few days ago, the outlook for the intermediate trend has weakened over the past few weeks, but it is premature to cry “wolf”.

For a primary uptrend to be in place, the bulk of the index constituents also need to trade above their 200-day averages. The number at the moment is 76% – somewhat down from its early April high of 83%, but nevertheless still firmly in bullish territory.

Source: StockCharts.com

Richard Russell, 86-year old author of the Dow Theory Letters commented as follows on the deteriorating market breadth: “This is a bearish picture. The ‘soldiers’ are deserting even while the ‘generals’ continue to march forward. In a war, this would be a prelude to disaster. In the stock market, it may be the same.”

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What does Breadth Say About Where Stocks are Heading?

Tuesday, January 26th, 2010

“Where breadth goes, the market usually follows,” goes an old market saying. Breadth indicators are useful tools to assess the inner workings of the market’s rallies or corrections, and are used to identify strength or weakness behind market moves, i.e. to assess how the bulls and the bears are exerting themselves.

First, a quick review of the stock market scoreboard. The MSCI World Index and the MSCI Emerging Markets Index have declined by 4,8% and 6,7% respectively since the highs of January 11. Following its sharpest three-day decline since March last week, the S&P 500 Index is down by 4.7% since the peak of January 19, the Dow Jones Industrial Index 4.9%, the Nasdaq Composite Index 4.7% and the Russell 2000 Index 4.8%. After yesterday’s bounce from short-term oversold levels, US stock market futures and foreign bourses are heading down again.

The major moving-average levels for the benchmark US indices, the BRIC countries and South Africa (where I am based in Cape Town when not travelling) are given in the table below. With the exception of the Russell 2000 Index and the Russian Trading System Index, the indices in the table are all trading below their 50-day moving averages. The S&P 500 Index is threatening to break below its December low of 1,092 and also to breach an upward sloping trend line that extends from the August lows. A decline below these support levels could signal a deeper pullback.

Although at this juncture all the indices are still trading above the key 200-day moving averages – an indicator of the primary trend – one should keep a close eye on these important levels. (The Shanghai Composite is a mere 64 points away from its 200 DMA as I am writing this post.)

Click here or on the table below for a larger image.

50-200

Back to market internals: The number of NYSE stocks trading above their respective 50-day moving averages has declined to 49.7% from 86.2% at the beginning of January (see top chart below). In order to be bullish about the secondary or intermediate trend, one would expect the majority of stocks to trade above the 50-day line. Based on this indicator, and also the 50-day moving average of the S&P 500 Index itself, the intermediate trend may be in the process of turning down, but a few days are needed to confirm the breaks.

For a primary uptrend to be in place, the bulk of the index constituents also need to trade above their 200-day averages. The number at the moment is 82.5% – somewhat down from its early January high of 88.7%, but nevertheless still firmly in bullish territory (see bottom chart below).

nya50r-een

Source: StockCharts.com

nya50r-twee

Source: StockCharts.com

Also focusing on the short-term technical picture of the S&P 500 Index, Adam Hewison (INO.com) provides a brief analysis advocating that one should be out of the market at the moment. Click here to access the presentation. (The analysis was done on Friday morning, but is still as relevant today as it was a few days ago.)

market-club-260110

It goes without saying that the strong rally since March is bound to be followed by a correction at some stage. We are about to find out whether this is the moment. In the meantime, be cautious out there.

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Insider Selling Pace Highest Since 2004

Saturday, August 29th, 2009

TrimTabs Investment Research reports that the pace of insider selling is now 30.6X that of insider buying the highest levels since they began reporting this data in 2004, to $6.1-billion, the highest amount since May 2008.

“The best-informed market participants are sending a clear signal that the party on Wall Street is going to end soon,” said Charles Biderman, CEO of TrimTabs.

TrimTabs’ data on insider transactions is based on daily filings of Form 4, which corporate officers, directors, and major holders are required to file with the Securities and Exchange Commission.

In a research note, TrimTabs explained that insider activity is not the only sign the rally is about to end. The TrimTabs Demand Index, which tracks 18 fund flow and sentiment indicators, has turned very bearish for the first time since March.

For example, short interest on NYSE stocks plummeted by 10.3% in the second half of July and margin debt on all US listed stocks spiked 5.9% in July, while 51.6% of advisors surveyed by Investors Intelligence are bullish, the highest level since December 2007.

“When corporate insiders are bailing, the shorts are covering and investors are borrowing to buy, it generally pays to be a seller rather than a buyer of stock,” said Biderman.

TrimTabs also reports that the actions of U.S. public companies have been bearish. In the past four months, companies have been net sellers of a record $105.2 billion in shares

In the last week, we published the counter-opinons of Laszlo Birinyi, and Barry Ritholtz (Merrill Lynch Fund Managers’ Survey, in Rally May Last Longer Than You Believe.

Birinyi says the recovery in the economy and earnings could far exceed expectations, and the market is pricing in the upside surprise.

“The markets are suggesting that the economy has turned the corner and is going to do a lot better than most people anticipate,” Birinyi, the founder of Westport, Connecticut- based research and money-management firm Birinyi Associates Inc., said today in an interview broadcast on Bloomberg Radio and Television. “I’m still very optimistic.”

Ritholtz pointed out that according to the Merrill Lynch Fund Managers’ Survey, professionals and fund managers have been buying this rally in a big way, and that may mean the market has a farther distance to run right now.

Investor optimism about the global economy has soared to its highest level in nearly six years, with portfolio managers putting their cash back into equity markets, according to the Merrill Lynch Survey of Fund Managers for August.

A net 75% of survey respondents believe the world economy will strengthen in the coming 12 months, the highest reading since November 2003 and up from 63% in July.

Confidence about corporate health is at its highest since January 2004. A net 70% of the panel respondents expect global corporate profits to rise in the coming year, up from 51% last month.

August’s survey shows that investors are matching their sentiment with action, by putting cash to work. Average cash balances have fallen to 3.5% from 4.7% in July, their lowest level since July 2007.

Bespoke pointed out that Short Interest has dropped to multi-year lows, and that pros are more optimistic than individual investors, in Pro Investors More Bullish than Individuals.

According to this week’s survey of the American Association of the Individual Investors (AAII), only 1/3 of investors surveyed are currently bullish, while nearly half (49%) are bearish.

Bottom Line: Insiders are bearish or taking advantage of better prices in the market to sell their stakes, Pros are bullish.

Individuals are somewhere in between, not as bearish as insiders and not as bullish as pros.

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Yamada Sees 44% of NYSE Stocks Under $10 as `Shocking’

Sunday, March 8th, 2009

This may seem as yet another gloomy outlook for US Stocks and for that matter stocks in general, however, its source, Louise Yamada, is by far, one of the most highly regarded technical analysts, globally, and with a superlative track record. Though she is a technical analysts she confirms that supply is still outstripping demand for stocks, and as long as their are less buyers than sellers, the Dow could sail through 6,000 to her secondary target of 4,000.

Here, she is covered by CNBC, Bloomberg, and Barrons:

Louise Yamada, the doyenne of market technicians, says the market “looks awful” and is calling for a primary target for the Dow of 6,000 pts, and her secondary target at 4,000 pts. She is one of the most widely followed technical analysts working today. Click play to view (transcript provided below if you can’t watch now)

 
Melissa Francis (CNBC): You have said, “Hope is not an investing strategy.”

Louise Yamada: Yes, thats true. I think there’s a lot of hope that things won’t go lower. I’m inclined to agree with prior comments that there’s not a lot to see that we have bases; that we have accumulation under way. Basically, what’s happening in the stock market as with everything that we follow in price is the study of supply and demand in the marketplace.

What we see is that the rallies are all being met with more supply, whether its mutual fund closings, whether its hedge fund closings, whether its people just trying raise some cash because they’re just unemployed, there seems to be a very consistent supply coming into the rally attempts.

MF: You say you think we’re going to go through 6,000?

LY:I think so. I think one of the things that we’ve been concerned about is that as price was approaching the 2002 low, that that 2002 low represents a 10-year support and its very familiar to what we have been seeing over the past year and a half, a lot of the overall sector work in 2006 and 2007 when the financials were creating this 10 year top and finally broke the support of the 2002 low.

The implication of the ‘bigger the top, the bigger the drop,’ is very real, and its always for reasons that we don’t always know, because the market is a discounting mechanism. But, it was clear at the time that what was happening in a 10 year breakdown, was very different to what was happening in 1998 financial crisis, or 1990 which were very small, and we said the implications here are greater than are being perceived.

And the same thing now could be said of the equity market with the break below the 2002 low. It concerns us greatly. You have 15 of the Dow stocks that are already broken below their 2002 low. Over the past year and a half, forget the teenagers and the toddlers that many of those stocks have regressed to, but you know, I disagree with the comment made about, “You could buy a stock at $2 because it’s like an option, but recognize that if you do that and it goes to $1, you’ve lost 50%.

MF: Louise, I know that you say that your next target after that is 4,000. You also say that Buy and Hold died a long time ago. A long time ago, you know, people who bought and held until the market hit 13,000, 14,000 did okay. Why do you think it died a long time ago? 

…If they sell, If they sold. But a lot of people didn’t. And therein lies the problem. People that bought in the 80s and 90s held through the 2000 crash, and then were in it again, for what has turned out to be a double top; perhaps a 10 year double top; many are still holding on.

I think its important to recognize, when the distribution starts to occur, the way it did for technology in 2000, and recognize that the Dow replaced stocks with Microsoft and Intel, right at the top in 1999, and Dow is a price-weighted average, so the larger priced stocks carry a lot more weight.

MF: So you’re saying that you have to be vigilant, and be awake, and sell stocks, now be a hog, and sell your stocks when you’ve made a little money. Or you’re saying you’ve got to be a day trader, that buying in your 401K is gone.

No, i don’t think you’re a day trader buying in your 410K. Technical analysis really helps people understand about when the structural run is over, in a sector or in a stock, just as in the 1973, Avon Products went from, 200 to 19. In 1986, Digital Equipment went from 200 to 19. There are ways to identify those breakdowns.

Enron, we were getting out under 60. There is an important characteristic of supply, that makes itself evident in a major top.

MF: Gotcha!, Louise Thanks so much. 

Listen to Louise Yamada, on Bloomberg discussing “shocking” state of the market.

http://media.bloomberg.com/bb/avfile/Economics/On_Economy/vppvUAwxq75Q.mp3

And from Barron’s, Friday, March 6, 2009
http://online.barrons.com/article/SB123631957962750593.html

The eponymous head of Louise Yamada Technical Research Advisors points to broad market measures’ breaking their 2002 lows, which would equate to around 800 on the Standard & Poor’s 500, as the key indicator of the market’s overall trend. (The S&P 500 closed down at 682.55 Thursday, down 30.32 or 4.25%.)

In other words, after the dot-com crash of 2000-02, stocks rallied only to give back those gains, and them some.

That’s important, Yamada explains, because following the Crash of 1929, the great loss of wealth didn’t come in the initial decline. Fortunes were wiped out among investors who had tried to pick a bottom during the initial phase of the bear market of the early ‘Thirties.

“You never know how low is the low,” she remarks. Yamada sees the downside risk on the Dow Jones Industrial Average in the range of 4000 to 6000 (down from 6,594.44 Thursday) and 400 to 600 on the S&P 500.

Given the widespread talk of “capitulation” (See Thursday’s column, “Not There Yet?”) the desire to pick a bottom seems as strong as in the early 1930s. Consider a market bellwether such as General Electric . It traded at 30 last summer and had fallen below 13 at the worst of the November’s rout. But it’s been cut in half from those former lows since then.

While prices plunge, Yamada observes investors have far less they can count on. Buyers of preferred shares in banks, which offered them seemingly bond-like protection, are being turned into common stock, which puts them on the front lines to absorb losses.

Louise Yamada, founder of Louise Yamada Technical Research Advisors, was formerly Senior Technical Analyst, Vice-President for Research at Salomon Smith Barney, where she was responsible for sector analysis of the U.S. and global markets. She writes for widely acclaimed reports, including Portfolio Specialist, Market interpretations, Japan Portfolio Strategist, Latin American Strategist, Group Spectrum, and special research Trends reports. Her work has been the subject of two featured interviews in Barron’s. A graduate of Vassar College, Ms. Yamada teaches at the New York Institute of Finance and frequently appears as a guest on CNBC.


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