Prez yells FIRE! in a crowded theater
January 23, 2010
– Comments (8)
Every week after the market closes on Friday I go to Barchart and use the same methodology to gauge what happened to the market in the previous week and plan what my strategy will be for the next week. Things started out fine early in the week but then our Prez dropped a bomb when he demonized the banks and everything on Wall Street. Most of the middle class owns a mutual fund, has an IRA or a securities account and has a bank account and/or loans with a bank. The confidence that the middle class has in these institutions is the key to this economic recovery. The balance and direction of the stock market is tied to the confidence people have in the banks and securities firms. I find it hard that he did not know the consequence of his attacks. Enough of that let's see what kind of damage he did.
Value Line Index -- contains 1700 stocks so it is much broader than the S&P 500 or the very narrow Dow 30 -- 20 DMA is sensitive and signaling caution
1 - The Index was down 3.37% for the week and is down .61% for the month
2 - The Index closed below its 20 day moving average but is still above the 50 and 100 DMA
3 - Barchart's 13 technical indicators signal a short term 60% sell signal but an overall hold
Barchart market momentum -- contains 6000 stocks -- the percentage of stocks trading above their daily moving averages for various time frames -- 20 DMA also signaling caution
1 - 20 DMA -- only 33.90% trading above their DMA -- that's less than half!
2- 50 DMA -- 55.50% trading above their 50 DMA
3 - 100 DMA -- 69.20% trading above their 100 DMA
The ratio of stocks hitting new highs to stocks hitting new lows for various time frames -- above 1.0 bullish, 1.0 neutral, below .99 bearish -- all 3 time frames bearish
1 - 20 day new high/new low ratio -- 484/2347 = .21
2 - 65 day new high/new low ratio -- 272/327 = .83
3 - 100 day new high/ new low ratio -- 208/229 = .91
Summary and strategy: The stock market has taken a blow to the gut given by the person who is supposed to be leading the recovery. He sees the key as new jobs but he is attacking the institutions that can lend the money and raise the capital to make those new jobs possible. This next week I will trim any stocks failing to maintain a price above its 50 DMA but will not be replacing in my portfolios until I see the Value Line Index recover above its 20 DMA. I don't spit into the wind.
Wall Street Survivor results: I took it on the chin this week. The market as measured by the S&P 500 down 2.09% month to date and the leader Anthony Miraydari is up 30.14% so far this month. I'm down in the 7th out of 8th place with a loss of 3.61% month to date -- maybe next week.
Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email JimVanMeerten@gmail.com.
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