Ticker Sense

May 26th Blogger Sentiment Poll

Bloggers were mostly neutral at the end of last week.

Blogger Sentiment Poll Participants:

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

May 18th Blogger Sentiment Poll

Blogger Sentiment Poll Participants:

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

S&P 500 Net OB/OS Reading

On this blog we commonly refer to the overbought and oversold characteristics of stocks, indices, commodities - anything with a price.  There has been some question about what methodology we use to determine the thresholds of overbought and oversold.  Birinyi Associates uses a system similar toBollinger bands, but not identical.  A stock is classified as being "overbought" when it is more than one standard deviation above its 50-day moving average, likewise a stock is oversold if it is more than one standard deviation below the 50-day average.  Theoretical highs and lows that are sometimes mentioned are derived using the extremes over the last 18 months and a proprietary formula to determine price.

The chart below shows the S&P 500 based on the sum of its members.  We analyzed all 500 stocks' trading ranges over the last year and calculated if they were overbought or oversold on a given day.  Stocks that were oversold received a score of -1, while those that were overbought received a score of +1.  By adding up the scores of every member for each day we arrive at a Net OB/OS score for the S&P 500; where a reading of -500 would mean that every member is oversold and conversely if they were all overbought the indicator would read +500.

As shown, in terms of broad market extremes, the indicator bottomed at -496 on October 9th, 2008.  The recent peak occurred on May 4th at +372.

As more stocks become overbought or oversold the number of stocks likely to see negative or positive reversals increases.  We can also see from this chart how the market can experience a correction in time and not necessarily in price.  Using the S&P 500 as an example, the 50-day average is now trending up and if the index trades sideways it will return to its normal range.  The same holds true for the stocks, the lack of big gains since May 4th has seen roughly half the index members return to their normal ranges.

S&P 500 & Sector P/E Ratios

When S&P first created the GICS sector classifications in 2001 pricing was backdated to 1989 and fundamentals were provided starting in 1994.  Since then, on a diluted basis, the P/E ratios for eight of the ten sectors and the S&P 500 have made new lows on a trailing basis.  Utilities is the exception, while we are not analyzing the P/E for the financial sector since its earnings are negative.  

The chart below shows where the sectors and the market stand versus their historic high and low P/Es.  The line on the chart indicates the change in P/E over the last year.  As shown, health care and energy remain nearest to their lows, while the consumer discretionary sector has seen its P/E gain significantly resulting from losses by GM and Ford.

The P/Es shown here use the current index price and diluted EPS from continuing operations for the previous twelve months.  Since trailing earnings per share is a rolling calculation, and earnings for 2009 are expected to be 17.2% worse than 2008, the P/E is likely to increase even if the index trades sideways.  In other words, using the bottoms up EPS estimate of $56.25 for the S&P, stocks would have to decline below 575 to revisit the low P/E of 10.09.  In our view this scenario is unlikely.

May 11th Blogger Sentiment Poll

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

Blogger Sentiment Poll Participants:

27/7 Wall St (-) Ahead of the Ticker (N) Carl Futia (+) Daily Dose of Optimism (-) Dash of Insight (+) Elliot Wave Lives On (-) Fallond Stock Picks (-) In the Money  Learning Curve (-) MaoXian  Millionaire Now! (N) Navivest (+) Peridot Capitalist (-) Smart Money Tracker (-) StockAdvisors.com  Traders Talk (-) Wall Street Folly  Wishing Wealth (+)

Overbought / Oversold: Dow 30

Below we highlight one of our most closely followed customizable products.  This overbought / oversold report on the thirty members of the Dow Jones Industrial Average highlights trading parameters based on the fifty day moving average.  Alcoa, American Express, and Caterpillar examples of stocks that are currently overbought.  AT&T, Coke, and IBM are examples of stocks that in the middle of their trading ranges, and 3M, Boeing, and Kraft are at their theoretical highs.

(click the image to enlarge)

Energy Sector Performance: Better Than the First Glance

Since energy stocks bottomed on 3/5/09 they have rallied back 26.68% versus a 34.72% gain for the S&P 500 during the same period.  At first glance we see that energy has lagged the market by 8.04%, but the performance of the sector has actually been a result of a small percentage of its members.

The energy sector is made up of 39 names which are listed below, 85% of those stocks have actually outperformed the sector index.  Going one step further, 79% of energy stocks have outperformed the S&P 500 since the March 5th close.  Many of the small speculative energy companies have posted significant gains, including three that are up more than 100%.  

The culprits have been the conglomerates: Chevron, Conoco, and Exxon.  These three stocks account for 53% of the sector's total weight and their under-performance has thus been reflected.  On an unweighted basis the energy sector has outperformed the S&P 500 by 13.69% since 3/5/09.

Reminiscences Growth Portfolio Up 20%!

As of yesterday's close, the growth portfolio highlighted in Reminiscences (Birinyi Associate's monthly newsletter) was up 20% for the year.  Two of the stocks recently added on April 29th were up 10% each.

Click here for more information on the newsletter.

May 4th Blogger Sentiment Poll

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

Blogger Sentiment Poll Participants:

27/7 Wall St (-) Ahead of the Ticker (N) Carl Futia (+) Crossing Wall Street  Daily Dose of Optimism (-) Dash of Insight (+) Elliot Wave Lives On (-) Fallond Stock Picks (-) Learning Curve (-) MaoXian  Millionaire Now! (-) Navivest (+) Peridot Capitalist (-) Smart Money Tracker (-) StockAdvisors.com  Traders Talk (-) Wall Street Folly (+)