Ticker Sense

March 30th Blogger Sentiment Poll

After a few technical glitches and some vacation time, we're back!  Bloggers are generally bullish following the market's strength.

Blogger Sentiment Poll Participants:

24/7 Wall St. (N) Ahead of the Ticker (+) Carl Futia (+) Crossing Wall Street  Dash of Insight (+) Elliot Wave Lives On (-) Fallond Stock Picks (+) In the Money (+) Information Arbitrage (-) Learning Curve (+) MaoXian  Millionaire Now! (N) Navivest (+) Peridot Capitalist (N) Smart Money Tracker (+) The Shark Report (-) StockAdvisors.com  Traders-Talk (+) Wall Street Folly

Market At Extremes: Not a Time to Buy

Based on Birinyi Associates' proprietary market and sector indicators we are at short-term extremes.  Traders with aggressive accounts should look to take profits, and investors with more long-term accounts should be cautious on taking new positions.  Consumer discretionary, technology, and materials stocks are the most extreme, while health care and utilities names have lagged.  

The Overbought/Oversold indicators are short-term measures, while the Momentum indicators above are for the longer term.  The momentum indicates that the market can certainly go higher, but we have had an abrupt move and some consolidation should be expected.  

See our posts from March 10th where we indicated that the market was at extreme lows and a rally could be expected if the S&P 500 closed above 715.  The index has gained 15% since the close of trading on 3/10/09.

Sector Trading Indicators

S&P 500 At Top of Downtrend

Birinyi in the News

Laszlo Birinyi will appear on Bloomberg TV tomorrow March 26th at 8:00am to discuss today's Reminiscences Newsletter and the US equity market.

Adapt, Change, Survive - The DJIA Needs Adjustment

Laszlo Birinyi appeared on CNBC yesterday afternoon to discuss some recent contentions about changing the members of the Dow Jones Industrial Average, and changing investment styles in a new type of market.

The bottom line for the Dow, is that in a price weighted index a stock trading at or around $1 is meaningless.  If Citi goes to zero it will only cost the index 8 points.  It is time to make significant changes to the index in order to maintain a meaningful representation of US stocks.

Click here for a link to Mr. Birinyi's interview.

Stock Correlation Remains High

Picking winners is becoming increasingly difficult, and picking sectors is now almost useless.  The chart below shows the average correlation of each S&P 500 stock with the S&P 500 index on a rolling 200 day basis.  As shown, beginning in the middle of September members became much more correlated with the market and have remained at high levels since then.  

Moving up to the sector level there are no areas that stand out.  A traditional long/short, market neutral strategy is useless in this kind of environment.  Even holding stocks overnight is risky on the long or the short side.

One encouraging note is that this is the first occurrence of such high sector correlation in a bear market.  Bear markets are shaded in the chart above, and as shown correlation generally rises during a bear market, and peaks afterwards.  

S&P 500 At Top of Downtrend

Today's 5.26% gain in the S&P 500 has placed it at the top of the recent downtrend which began on February 10th.  It has traded lower in the channel highlighted below and has tested the upper limit several times today.

Can the market buck the trend?  The chart below is excerpted from a Birinyi research bulletin this morning highlighting market performance on days that are up 3% by 10:00.  Granted the chart is for the DJIA, but the composite indicates that on average the market closes at the high.  (There have been eight such occurrences since 1990.)

It is probably too late in the day to place any bets on afternoon action, but a breakout above 715 for the S&P 500 might make for a comforting, stomach settling, rally.

Sector Trading Indicators

Below we highlight a daily indicator that we use to track the S&P 500 and its ten sectors.  By tracking the sectors using both momentum indicators and overbought / oversold indicators we are able to identify extreme levels where the probability of a reversal is increasingly likely.

The "Overbought / Oversold" indicator is based on a combination of top down and bottoms up sector and market data, and is a short-term gauge helpful in identifying entry and exit points.  The "Momentum" indicator is based on a wider series of moving averages and will help illustrate when a trend has become exhausted.  Financials currently exhibit simultaneous OB/OS and Momentum buy signals which indicate that the downtrend in that sector has reached an extreme.  Industrials and utilities are very oversold, but we might use more caution with these issues since momentum indicates that the trend may not yet be exhausted.

March 9th Blogger Sentiment Poll

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

Blogger Sentiment Poll Participants:

24/7 Wall St. (-) Carl Futia (+) Crossing Wall Street (+) Daily Dose of Optimism (-) Dash of Insight (-) Elliot Wave Lives On (-) Fallond Stock Picks (-) In the Money  Information Arbitrage (-) Knight Trader (-) Learning Curve (+) MaoXian  Millionaire Now! (N) Navivest (-) Smart Money Tracker (-) StockAdvisors.com  Wall Street Folly  Wishing Wealth (-)

March 2nd Blogger Sentiment Poll

There are more bears than bulls in this week's poll.  This is the first net bearish reading since September.

Blogger Sentiment Poll Participants:

24/7 Wall St. (-) Ahead of the Ticker (+) Carl Futia (+) Crossing Wall Street  Daily Dose of Optimism (+) Dash of Insight (-) Elliot Wave Lives On (-) Fallond Stock Picks (-) In the Money  Information Arbitrage (-) Knight Trader (N) Learning Curve (+) MaoXian  Millionaire Now! (N) Navivest (-) Peridot Capitalist (+) Smart Money Tracker (-) StockAdvisors.com  Wall Street Folly  Wishing Wealth (-)