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01302013 Interim January 30, 2013

Posted by easterntiger in economic history, economy, financial, markets, stocks.
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There is one trading day left on the January calendar. This is an opportune time to look at trends, and positions in place.

And, to update an observation from the early January post:
One key measure that I follow is a gauge of buying strength between stocks (risk) and bonds (safety) has signaled market turn zones 4 times in the past 2 years, at 0.3549 (2/11), 0.3532 (5/11), 0.3516 (4/12) and 0.3568 (9/12). This measure is now at 0.3555 after hitting 0.3566 last Friday.
This measure now stands at 36.88. This is almost an imperceptible level from 3 weeks ago. This denotes decreasing reward and increasing risks in
holding equities (S, I and C funds) and decreased risk in the F fund and related L funds.

Significantly, one market leader, the Dow Transportation index is exhibiting ‘terminal’ type behavior. It appears to be completing a parabolic rise into
yesterday’s high. This has advanced 21% in only 11 weeks. Strong transports theoretically ‘lead’ the Dow Industrials. It has reversed downward today, falling
today by the largest amount in over 3 months. Similarly, the proxy for the S fund, also reversing, is now net zero for the last 7 days, as of today.
The Dow Transport reached a record high on Monday. Three earlier record highs during the previous 14 years have signaled final market tops and significant
reversals in the next year following each, in 1999, 2007 & 2008.

The S&P100, which I use for the Weekly Momentum Indicator(WMI) has risen by an average of only 3.47 points per week for the past three weeks, or, a total of
10.41 points. Last week, the average per week was at 4.15 points per week, or a total of 12.46 points in the previous 3 weeks. This is clearly a game of giving you as much risk as is absolutely possible along with the least reward possible. If you enjoy running across a busy street to grab an extra $100-200 from the street, then, this is the market for you.

Ironically, the NASDAQ has risen just 1/10th of 1% YTD!! This ‘divergent’ manner among the major indexes is not an indication warranting high confidence.

I am doubling my allocation of F, with the least risk in over 5 years, which is right in line with the 5-year highs in several of the stock indexes.

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Comments»

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