Market ends the week weak
OK. Time for the reality check. If you had listened to the talking heads at the beginning of the week you night have thought the market was in a full recovery mode but it ran out of gas toward the end of the week. We have been on a roller coaster ride since the beginning of May, but it has been the downward portion of the ride. Remember to use the 3 yard sticks I've developed from the data on Barchart because every sample has some error in it and doesn't tell the whole story. So where are we?
Value Line Index-- Contains 1700 stocks so I think it is a better representation of the market than the S&P 500 or the even narrower Dow 30 -- down 4 days out of 5
1 - Although we are up by 5.75% since the beginning of the month we are down 6.54% for the last month
2 - 80% Barchart technical sell signal
3 - Closed Friday below its 20, 50 and 100 day moving average
4 - Barchart Trend Spotter (tm) sell signal
Barchart Market Momentum -- Contains approximately 6000 stocks -- Percentage of stocks closing above the Daily Moving Averages (DMA) for various time frames -- Needs to be above 50% for me to get excited -- I'm not excited this week
1 - This week only 41.57% closed above their 20 DMA, only 40.33% closed above their 50 DMA, only 33.59% closed above their 100 DMA
2 - Last week over 52.76% closed above their 20 DMA, only 43.43% closed above their 50 DMA, only 38.40% closed above their 100 DMA
3 - Last month over 72.26% closed above their 20 DMA, only 39.32% closed above their 100 DMA, over 50.57% closed above their 100 DMA
Ratio of stocks hitting new highs/new lows for various time frames -- 1.0+ bullish, 1.0 neutral, below .99 bearish -- Short term more lows than highs
1 month new highs/new lows -- 513/550 = .93
3 month new highs/new lows -- 276/301 = .92
6 month new highs/new lows -- 1.28
Summary and Investment Strategy -- All 3 yard sticks were negative in the short term this week. I will continue to trim stocks from my portfolios that are not beating the market. If I find some bond funds or stocks fighting the trend I might average in but I'm not in a mood to bottom fish. Time to use extreme caution.
Jim Van Meerten is an investor who writes on investing here and on Barchart Portfolio Blogs. Please leave a comment below or email JimVanMeerten@gmail.com.