Washington's hot air deflates the market
I just returned from a week in Orlando at the Money Show. The speakers were terrific and I came back with a lot of good ideas that I'll share in the coming weeks. I'm not sure what happened to your portfolio but I came back to a lot of triggered stop losses. My Wall Street Survivor portfolio is down 1.97% for the month which puts me back in 6th place behind this months winner so far, Tobin Smith who has a 1.56% gain.
Most speakers at the Money Show had different opinions on the market, how to play it and what's in store for the next 6 months but one thing they all agreed on was that earnings, the economy and job numbers are not being properly factored into this market. Things are improving but every time someone in Washington opens their mouth the hot air deflates the market. Is the hot air deflating your portfolio?
Let's take a step back and see how the market did. As usual I'll use Barchart for my data.
Value Line Index -- I use this index because it contains 1700 stocks making it broader than the narrower Dow 30 or the S&P 500 -- this week down by .95%
1 - Barchart's technical indicators signal a 40% sell signal -- 3 buys, 2 holds and 8 sells
2 - The index closed Friday below its 20, 50 & 100 day moving averages for the first time in many months
Barchart's market momentum indicator -- approximately 6000 stock are used -- the percentage of stocks closing above their daily moving averages for various time frames -- above 50% good but below 50% bad -- this week all 3 looked bad
1 - 20 DMA -- only 20.08% closed above
2 - 50 DMA -- only 35.45% closed above
3 - 100 DMA -- only 45.78 closed above
Ratio of stocks hitting new highs to stocks hitting new lows for various time periods -- 1.0+ bullish, 1.0 neutral, below .99 bearish -- this week all 3 time frames were very bearish
1 - 20 day ratio of new highs to new lows -- 278/3660 = .08
2 - 50 day ration of new highs to new lows -- 152/1733 = .09
3 - 100 day ratio of new highs to new lows -- 74/962 = .08
Summary -- The market is reacting very negatively to the hot air spewing out of Washington. The improving economy, job numbers and earnings are being overshadowed by the threats coming out of the White House. Isn't it ironic that Obama took all the campaign handouts from Wall Street, the banks and hedge fund managers and now spends his time demonizing them and telling the common folk how he will punish them. This week I'll trim non-performing stocks from my portfolios but I'll hold up replacing them till I see a little bit of support in the market numbers.
Alternative strategy -- At the Money Show I ran into 2 of my all time Wall Street heroes -- Robert Stovall and Paul Kangas. Both these guys are going strong and still giving us all some productive and sane advice. Since it's Super Bowl Sunday it might be time to give a return visit to Mister Stovall's Super Bowl indicator. He's observed that the winner of the Super Bowl predicts the performance of the market for the rest of the year. If the NFL wins he can look forward to an up market, if the AFL wins the market will perform poorly. Don't laugh; the indicator has been correct for 34 of the last 43 Super Bowls. Before you go to bed tonight the Bowl game winner will be determined and you'll know how to play the market. I'm not taking sides, I just want to know whether to go long or short.
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
Disclosure: I have no positions in the stock in my Wall Street Survivor portfolio