Ticker Sense

Play the Odds: This Is Probably Just a Correction

Right now the S&P 500 is down 5.82% from its high close on 1/19.  Market declines always bring out the bears, pointing to the economy, the government, the profits etc as reasons why the gains are all over.  Birinyi Associates is keen on pointing out that these are the same commentators who called for declines when the S&P crossed 900 and 1,000.

We chose to look at these kinds of bull market moves objectively.  First we define a bull market as a 20% gain off a low and examine each period visually for confirmation (the 20% gains that occurred in 2001 and at the end of 2009 were not included in our analysis as bull markets).  Then we scanned each bull market since 1945 looking for corrections of 5% or more.  This scan resulted in 117 so called corrections, which posted an average decline of 8.52% of 45 days.  When we further pair down the list and look for corrections that declined over 10% there were only 31, and going one step more only 11 were bull market tops.  

The point of all this is that bull markets experience corrections, and they are actually somewhat frequent.  Based on the stock market's history, there is only a 9.4% chance that the current decline will turn out to be a bear market.

 
 

Telecom Sector "Correction"

The S&P 500 Telecom sector fell -1.2% yesterday, pushing the sector into a 10% decline.

Telecom Sector Since 2009

Since 1962 there have 54 declines of greater than 10%. The average decline is 18.6% and average duration is 141 days.

The most recent 10% decline occurred earlier in this bull market.   From 4/3/09 to 7/10/09, the telecom sector fell 11.2% and the decline lasted 98 days. 

 

Consumer Confidence - Up With a Long Way to Run

Consumer Confidence, reported this morning at 10:00, came in above expectations at 55.9 (estimates were for 53.5).  This is the highest level since September-08, but as shown below the indicator still has a long way to run which is potential continued fuel for an equity rally.  

 

Going one step further and looking at equity market performance after Consumer Confidence levels of 55.9 or less we find that on average the market is up 10.4% over the following year.  Granted that five of the sixteen occurrences are from the previous recession.  If the recent data points are eliminated the market is up an average 14.9% and more importantly it is up 100% of the time in one year.

 
 
 

January 25th Blogger Sentiment Poll

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

 

 

Blogger Sentiment Poll Participants:

24/7 Wall St (-) Carl Futia (+) Dash of Insight (+) Elliot Wave Lives On (-) Fallond Stock Picks (-) In the Money  Learning Curve (-) Maoxian  Millionaire Now (-) Peridot Capitalist (-) Quant Investor (N) Shark Report (+) Smart Money Tracker (N) StockAdvisors.com  Traders-Talk (+) Wall Street Folly

Traders Happier Following a Long Weekend?

There have been six NYSE holidays since the beginning of the bull market that have given investors a three-day weekend. On average the day after a long weekend, the market gains 92 basis points and has been positive every time.

 

 

Day After a 1% Decline

Last Friday the S&P 500 declined 1.08%, looking at similar days we find that on average the market is positive the next day and traders should expect an afternoon rally.  Below we highlight the intra-day composite of days following a 1 - 2% decline.

 

As shown by the chart above, traders should have a positive bias today.  The market gains an average of 0.59% from the open to the close following a 1 - 2% decline.  The best trade is to buy the open and sell at 10:30 for an average gain of 0.33%.

January 19th Blogger Sentiment Poll

Bloggers are bearish and decided this week, there were no neutral responses.

 

 

Blogger Sentiment Poll Participants:

24/7 Wall St (-) Carl Futia (+) Dash of Insight (+) Elliot Wave Lives On (-) Fallond Stock Picks (-) In the Money  Learning Curve (-) Maoxian  Millionaire Now (-) Peridot Capitalist (-) Quant Investor (-) Smart Money Tracker (-) StockAdvisors.com  Traders-Talk (-) Wishing Wealth (+)

ETFs: 2009 Review

2009 was a record year for ETFs as assets grew 42% from a year earlier ($782 bln vs $551 bln).  Net flows, however, decreased 56% from 2008 (+$98 bln vs +$222 bln). 

US focused ETFs were the only group to record an outflow of funds in 2009 (-$40.5 bln).  Bond funds had the largest inflow (+$41.7 bln).  US and Bond ETFs are the largest by market cap, $275 billion and $99 billion respectively.

 

As far as sub-categories: "Emerging Market (All)", "Commodity - Gold," and " Bond - TIPS" had the largest inflows in 2009.  "US - Large Cap," " Foreign - EAFE" and "US - Large Cap (Growth)" had the largest outflows.

 

January 11th Blogger Sentiment Poll

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

 

 

Blogger Sentiment Poll Participants:

24/7 Wall St (N) Ahead of the Ticker  Carl Futia (+) Dash of Insight (+) Elliot Wave Lives On (-) Fallond Stock Picks (-) Learning Curve (-) Maoxian  Millionaire Now (-) Peridot Capitalist (-) Quant Investor (N) Smart Money Tracker  StockAdvisors.com  Traders-Talk (N) Wall Street Folly  Wishing Wealth (+)

Another Good Year?

It's a new year and we're starting to hear about the "January Effect" again.  The idea is that as January goes so goes the year, a gain in January signals a good year while a decline in January signals a bad one.  This is an interesting theory, but let's not forget about 2009 where when the S&P 500 lost 8.5% in the month of January and then staged the steepest rally since World War II.  

Here we take a slightly different twist and look only at the first day of the year instead of the first month.  Yesterday 2010 began with a 1.6% gain.  As shown by the table below, this has occurred 10 other times and the market is up for the year 90% of the time.