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03182010 May 25, 2010

Posted by easterntiger in economic history, economy, financial, gold, markets, stocks.
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Weather Report 03182010

Current Positions  (Changes)

I(Intl) – exit; S(Small Cap) – exit; C(S&P) – exit ; F(bonds) up to 30%;  G(money market) – remainder

Weekly Momentum Indicator (WMI***) – last 4 weeks, thru 03/17   +12.83, +22.86, +16.64, +26.79

(3wks ago/2wks ago/last week/this week)
This is a listing of positive versus negative aspects of the numerous U. S. and foreign markets.

+ In the S&P 100 & S&P 500 (markets, in general), a positive ‘trending’ condition (momentum) has existed for the past 5 days
– There is no ‘trending’ condition on weekly pricing, as the daily trending is effectively only canceling out recent corrections
– The Nasdaq is up a total of 0.5 POINTS, not percent, in the past 5 days

+ Price levels on most indices are matching levels not seen since October of 2008.
– It has taken approximately 52 weeks to retrace the distance back up the same range which only took 13 weeks to decline in 2008.

+ Daily relative strength should allow these levels to remain intact for another week or more
– Without several more weeks of upward momentum, a weekly relative strength breakdown is likely to occur, which is called a negative price divergence (SLOWLY rising stock prices with weakening relative strength occurring simultaneously).  A similar action occurred in the last two weeks of July 2008 through the first three weeks of August 2008.  At that time, price momentum lost the battle shortly thereafter, just before the September 2008 crash.  It is not the only element necessary for the crash, but, it would be a major drag on further direction.  Recall the 3 day drop in prices in January that erased over 70 days of gains!!!  Was that a dress rehearsal for the months ahead?

+  If this momentum can continue past the next couple of weeks, there is a possibility of continued highs for the year which could lead into May, creating new highs for the year and further rivaling the measurements against the decline in 2008.
–  Of course, price charts are notoriously deceptive, as the news only feels it necessary to tell you whether stock levels are up or down with respect to yesterday, to last week/month/year ago, or, ‘a new 17 1/2 month high’.  All these are no indications of where stocks are actually going, and certainly not whether there is or isn’t, high vs low risk in the current and projected environment.

+ So-called ‘dip buyers’ continue to put a support level under the market after each 5% or so correction since November.
– Rising volume (where selling increases as prices fall) during the recent decline from mid-January to early February, and falling volume (buying decreases as prices rise) have continued since the most recent bottom in February to now, as has been the case for each of the bounces from multi-week lows.

Neutral – the S&P 100 high so far this week is within 1% of the high in January just before the multi-week decline of 8.3%.
There are many debates currently underway as to whether the March ’09 bottom represents a multi-decade bottom, or not.
Many indices and market sectors have made between 7 & 9 up/down cycles in a narrow range since early October.

Positive – interest rates have made three successively lower peaks on December 31st, February 19th and March 12th.  This
should represent a medium-term ‘ceiling’ and possibly forecasts lower rates in the coming weeks or months.

And speaking of interest rates, I’m thinking about a drinking game – for each time the market stands still to await the Fed chairman ‘announce’ that interest rates are going to be held at ultra-low rates for an extended period of time – bottoms up! Let’s see.  We’ve done the math, Mr. Bernanke.  You have no choice. And neither does your successor.  With a $300-400 billion tidal wave of Alt-A’s, ARM’s and Option ARM’s, geared to short term rates, due to be reset starting this year and for the next 3 years, and since we’re mimicking Japan with our own ‘quantitative easing’ approach to help alleviate our debt imbalances, after  observing Japan’s nearly 20 years of low rates, and counting . …….well?  I’ll just play along and pretend that you’re telling me something I don’t already know.

Key Market Characteristics and Considerations
* Selling to buying ratios in key market sectors continue to defy appearances of any confidence in the markets at their current levels – this is selling by insiders, corporate executives employed by the companies whose stocks they buy/sell

Technology          $263 in value sold to every $1 in value being bought

Consumer Services            208

Consumer Durables           156

Health Care                 126

Energy                        92

A majority of the world’s market indices have not exceeded or even reached their earlier highs of the year, established in January. Without reaching or exceeding these earlier highs, the current uptrend should be treated with caution, with respect to those positions which benefit from positive trends.
These markets have                         These markets DO NOT have
New Highs Over January                   New Highs Over January

FTSE – London                                 DAX – Germany
SMI – Switzerland                             CAC – France
Nasdaq – U.S.                                    AEX – Netherlands
S&P 500 – U.S                                   ISEQ – Ireland
SMSI – Spain
Dow – U. S.
MICEX – Russia
BSE – India Bombay Stock Exchange
Hang Seng – Hong Kong
Shanghai – China
All Ordinaries – Australia
Nifty 50 – India
Nikkei – Japan
Bovespa – Brazil
Merval – Argentina

***The Weekly Momentum Indicator is a strength measure of the S&P100, the largest 100 stocks in the U. S., in terms of market capitalization (share price of each of the 100 stocks times the number of shares available to the public).  The WMI is the difference in the S&P100 average opening price for each of the past three Monday mornings and the average closing price for each of the past three Friday afternoons.  This detects upward, sideways or downward movement of the overall market, since the markets generally move in synch from one index to another, and correlates very well with identifying opportunities for reward/gain and for situations for risk/loss in all equity indexes.  Rising numbers from the prior week are positive opportunities, while falling numbers from the prior week are avoidance opportunities.  I have a weekly, thirteen-year history for this indicator at the time of update in this report (03/17/2010).***

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