Ticker Sense

Gold is Overbought

Currently Gold, trading at a spot price of $896/oz, is 3.3% above its normal trading range.  Birinyi Associates classifies it as being "overbought" and while it might not be a sell we would advise clients and readers that they not buy until it returns to the normal range.  In a note picked up by Bloomberg yesterday clients were advised of the situation, and that Barrick Gold (ABX) was an intriguing short opportunity as it was also overbought.  Click here for the Bloomberg write-up.

 

Bear Market Rally or Bull Market Correction?

The debate continues over the path of the market; bloggers continue to be bullish, and strategists at expecting a 20% gain in 2009, but $900 gold the recent sell-off in stocks and wary economic news has kept bears calling for further declines.  On December 1 Birinyi Associates did not necessarily call the bottom, but defined November 20th as the market's low and predicted that it would not decline below that.  Since then stocks have traded mostly sideways, with the market currently at the lower end of that trading range.  

One point that has escaped many commentators and participants is that by all traditional definitions we have entered a new bull market.  With stocks exhibiting such high levels of volatility most people are likely waiting for sustained gains of 25 - 30% before calling for "the bull market of 2009," but the chart below illustrates that the bull market qualification (a 20% gain from a low) has clearly been satisfied.

In a recent interview with Forbes.com Birinyi Associates' Jeff Rubin noted that the current environment is more likely a severe bull market correction.  Click here for a link to the interview.

January 26th Blogger Sentiment Poll

There are more bulls than bears in this week's poll.

Blogger Sentiment Poll Participants:

24/7 Wall St. (-) Ahead of the Ticker (+) Carl Futia (+) Daily Dose of Optimism (+) Dash of Insight (-) Elliot Wave Lives On (-) Fallond Stock Picks (-) In the Money  Information Arbitrage (-) Learning Curve (+) MaoXian  Millionaire Now! (N) Navivest (+) Peridot Capitalist (+) Random Roger's Big Picture (+) Shark Report (+) Smart Money Tracker (+) Stock Advisors.com  Wind River Advisors  Wishing Wealth (-)

World Wide Economic Growth in 2009

Below we highlight regional economic growth forecasts in 2009.  As shown many emerging economies are expected to continue growing through the year; while developed nations are expected to contract.  European countries are expected to contract the most and China is expected to exhibit the strongest growth, although at a much slower rate than previous years.

For more detailed information on international equity markets, including detailed stock and sector information, subscribe to any of Birinyi Associates' research products listed here.

Banks Tank: Worst Decline in History

Bank stocks are currently in a decline worse than any in their history; including the Great Depression.  As shown below, as of 1/21/09 the KBW Bank Index had declined 78.5% from its 2007 peak; in the 1930s the New York City Bank Index declined 78.1% in the same time period.  On the bright side the bank index bottomed doesn't have much farther to fall given the historical comparison, but also as shown, those stocks did not do anything for a long time afterwards.  This analysis was also featured by CNBC's Patti Domm, click here for her thoughts as well.

January 20th Blogger Sentiment Poll

There are more bulls than bears in this week's poll.

Blogger Sentiment Poll Participants:

24/7 Wall St. (-) Ahead of the Ticker (+) Carl Futia (+) Daily Dose of Optimism (+) Dash of Insight (N) Elliot Wave Lives On (-) Fallond Stock Picks (-) In the Money  Information Arbitrage (N) Knight Trader (N) Learning Curve (+) MaoXian  Millionaire Now! (N) Navivest (+) Peridot Capitalist (N) Random Roger's Big Picture (+) Self Investors (+) Shark Report (+) Smart Money Tracker (N) Stock Advisors.com  Traders Talk (N) Wishing Wealth (-)

Global Outlook 2009: Part 1

Part 1 Birinyi Associates' Global Outlook for 2009 details forecasts and estimates for US markets and stocks, specifically the S&P 500, its members, and their sectors and groups.  Comparing bottoms up estimates to the top-down forecasts issued by market strategists we find that most market commentators are generally uncertain about the year ahead.  On the top down side, strategists expect the S&P 500 to gain 20% during the year but EPS for the index are expected to decline 20%.  The current bottoms up forecast points towards a similar 20% gain for stocks, but a more modest decline in EPS of 1.7%.

Below we highlight what is probably more important than earnings the number itself: the trend.

S&P 500 EPS for 2008 & 2009:

In the last two weeks negative revisions have pushed 2009 expectations below those of 2008, and the negative momentum which picked up in October-08 seems to continue.  2009 expectations - on a bottoms up basis - have been revised down 25% over the last three months.  As long as negative momentum continues for EPS forecasts the market will not be able to sustain gains.

Sign up for Birinyi's Mini-Institutional service for the full report, including:

• Birinyi Associates' market outlook and 2009 strategy.
• Detailed bottoms up impact analysis based on S&P 500 member price targets.
• Bottoms up versus top down earnings estimates for sectors and groups.
• Recommended sector weightings and stock recommendations by major brokerages (one sector stands out as the most recommended for 2009).
• Group earnings and earnings impact on sectors.
• International markets: the bright spots and what to avoid.

Click here and sign up for one month of the mini-institutional; or subscribe for six months at a discount.

Some Trading Ideas

Time and time again either we or others have referred to this market as a trader's market.  Investors who buy and hold have hopefully stopped looking at their portfolios, but for those willing to pay tax on short term gains there is money to be made.  As part of Birinyi's monthly Reminiscences newsletter subscribers are treated to five new trading stocks with each publication.  That portfolio was UP 11.21% for the year in 2008, and up 6.74% for the month of December.  A sample trading portfolio is highlighted below.

Click here for more information about the newsletter and how to receive portfolio updates every month.

January 12th Blogger Sentiment Poll

Bloggers are still bullish.

Blogger Sentiment Poll Participants:

24/7 Wall St. (-) Ahead of the Ticker (+) Carl Futia (+) Daily Dose of Optimism (+) Dash of Insight (+) Elliot Wave Lives On (-) Fallond Stock Picks (+) In the Money  Information Arbitrage (N) Knight Trader (N) Learning Curve (-) MaoXian  Millionaire Now! (N) Peridot Capitalist (N) Random Roger's Big Picture (+) Shark Report (+) Smart Money Tracker (-) Stock Advisors.com  Wall Street Folly

Continuing Jobless Claims RISE!

Initial jobless claims can't fall!  The press has bombarded us with headlines about how initial jobless claims fell from a week ago; but to us that is an oxymoron.  It is the same as saying the economy contracted by -2% in the fourth quarter to grow by 4% (versus 6% growth a year ago).  Nothing really contracted, the economy just grew at a slower rate.

Jobless claims are no different, fewer people reported new jobless claims this week than they did last week, but 467k people still lost their jobs!

We are much more concerned with the underlying continuing jobless claims, which actually rose from a week ago and is now even with the all-time highs set in 1975 and 1982.  The change in non-farm payrolls expected tomorrow morning is potentially even more disconcerting.  Last month the number came in at -533k, and this month it is expected to be -523k.  In this history of the indicator (starting in 1939) there has never been an instance of back to back declines in excess of -500k.