Ticker Sense

January 31st Blogger Sentiment Poll

Bloggers have shifted to a neutral outlook this week.

 
 

Blogger Sentiment Poll Participants:

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

DJIA is Overbought

The DJIA is 2% above the upper bound of its trading envelope.  The index is also approaching the most overbought level its has been in the past twelve months. 

 

The highest the index has risen above its short term moving average was 6.0% in early November.  Currently the index is approaching that extreme overbought level. 

 

Below is our complete Birinyi Sector Timing Model for the market and sectors.

 
 

For a very detailed explanation of our sector timing model please click here.

Laszlo Birinyi on CNBC

 

January 24th 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 (-) Learning Curve  In the Money  MaoXian  Millionaire Now  Peridot Capitalist (N) Quant Investor (N) StockAdvisors.com  Smart Money Tracker (-) Wall Street Folly  Wishing Wealth (+)

January 18th 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 (+) Learning Curve (-) In the Money  MaoXian  Millionaire Now  Peridot Capitalist (N) Quant Investor (N) StockAdvisors.com  Smart Money Tracker (-) Wall Street Folly

 

Overbought 31 Consecutive Trading Days

If you feel like the stock market has been defying gravity, you're right.  The S&P 500 has been overbought for 31 consecutive trading days as part of a continuous rally that began on 12/1/10.  While this type of gain is certainly not the "norm," there are 42 instances since 1945 where the S&P 500 has had longer winning streaks.  As recently as 11/12/10 the market was overbought for 45 consecutive days, and in 1961 it was overbought for 94 consecutive days!

The conventional wisdom is that what goes up must come down, therefore an overbought stock or index is a better sell than a buy.  When we analyzed the average returns of the 46 periods similar to this one, and found that over the next three and six months the S&P 500 has a 74% chance of gaining, and the average gain over six months is 4.74%.  (click the image below to enlarge it)

Birinyi In the News

In case you missed them over the past week, Birinyi Associates was featured in many prominent business articles.  Check out our firm's latest views and qualms as reported by the press:

 

Investors Get in a Lather Over Tech
Echoes of Dot-Com Craze Reverberate as Money Pours in to Start-Ups; One Big Difference: Profits

Making Sense of Market Forecasts
Most prognosticators miss the mark—but there are ways you can profit from their predictions.

Market Predictions, With Many Grains of Salt

Global Sovereign Debt Versus GDP

Global credit markets continue to dominate the headlines and keep equity markets on edge.  Below we take a look at 37 widely followed countries and how sovereign debt compares to each country's respective economic output.  On average, the world's debt equates to about 58% of GDP; excluding Japan the world has borrowed about 54% of GDP.  

From a style perspective, "emerging" economies have borrowed against 40% of GDP, while the average for developed nations is 74%.  Yields on 10y notes are about the same across the board, with Pakistan, Venezuela, and Greece yielding 14.3%, 13.8% and 12.3% respectively.  

We further summarized the debt ratings from Moody's, Fitch and S&P using a scale ranging from one to five, where a five is the firm's highest possible rating.  The developed world averages the highest possible score of five; of those 19 countries only four received a score lower than 5 (Spain is not one of them).  The highest rated emerging economy is China with a consensus rating of 4.7.

January 10th 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 (+) Learning Curve (-) MaoXian  Millionaire Now  Peridot Capitalist (N) Quant Investor (N) StockAdvisors.com  Smart Money Tracker (-) Wishing Wealth (+)

 

The Sell-Side is Cautious

Despite the headlines and press reports concerning investor sentiment being overly positive (Investors Intelligence and AAII), sell-side Wall Street analysts are increasingly more cautious.

 

Another measure of sentiment, the daily cumulative net upgrades vs downgrades, is decidedly less positive and shows a downtrend (more downgrades then upgrades) since its peak on July 22^nd of last year.

 
So despite the S&P's 25% rally since last July, the fundamental analysts are not jumping on the proverbial band wagon.