The market is in recovery so reinvest
Every Saturday morning on Financial Tides I run through my standard exercise of using Barchart and my 3 yardsticks to evaluate just what the market really did during the past week. One thing that I've learned over the years is you need to be proactive and not reactive in your investing. Most investors are lemmings who don't plan ahead. A week ago last Thursday was a market disaster from which the market is recovering. Too many people are still liquidating as the market begins its recovery. Let's get back to the yardsticks.
Value Line Index -- contains 1700 stocks so it's much broader than the S&P 500 or very narrow Dow 30 -- beginning to recover
1 - After 2 down weeks the Index was up 4.68% for the week If the Index were a stock
2 - Barchart technical indicators give it an 8% buy score
3 - The Index is trading below its 20 & 50 day moving average but is above its 100 day moving average
Barchart Market Momentum -- contain approximately 6000 stocks -- Percentage of stocks trading above their daily moving averages for various time frames -- Above 50% is always good -- Poor but improving over last week
1 - 20 DMA -- only 27.54% closed above on Friday --10.04% last week --68.62% last month
2 - 50 DMA -- only 39.97% closed above on Friday -- 23.79% last week -- 83.56 last month
3 - 100 DMA -- 60.77% closed above on Friday -- 43.83% last week -- 84.04% last month
Ratio of stocks hitting new highs to stocks hitting new lows for various time frames-- 1.0+ bullish, 1.0 neutral, under .99 bearish -- short term bearish but long term bullish
1 - 1 month ratio of stocks hitting new highs/new lows -- 199/345 = .58
2 - 3 month ratio of stocks hitting new highs/new lows -- 150/172 = .87
3 - 6 month ratio of stocks hitting new highs/new lows -- 125/104 = 1.20
Investment Strategy -- The Conference Board's Index of Economic Indicators was up for all 3 indicators -- leading, coincident and lagging. After 2 down weeks the market was up for the week but in a recovery not a growth mode. Since the economy is growing and this weeks market action was up I'll continue to trim under performing stocks but I not going to be afraid to reinvest that money into issues having recent upward price momentum.
Jim Van Meerten is an investor who writes on financial matters on Financial Tides and Barchart. Please leave a comment below or email JimVanMeerten@gmail.com