Market Indicators - Investor Sentiment
- hairie31
- Normxxx
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- Normxxx
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- hairie31
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- Normxxx
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» hairie31 - Bernie Schaeffer is very cautious
*Bernie on Wall Street with Fortune,
feels that there is lots of uncertainty in this market and is keeping 25 % in cash.
He thinks there's a reasonable chance the market is in peaking mode. He notes the huge inflows into Mutual Funds the first quarter and with all the rosy earnings forcasts...the market has gone nowhere.
He also unsure how the market will react to Interest Rate increases.
He questioned the theory that Low Interest Rates were good for the market and High Interest rates will be good for the market. Bernie says: "You can't have it both ways"
-- posted by hairie31
» hairie31 - Good Seasonal 6 Months ends in 1 week
*I don't hear anyone talking about it..but the good seasonal 6 month period ends in one week.
So far the S & P 500 is up 8.5 % in the last six months.
Last year the Seasonally Bad 6 month was showed a + 15.57 % in the S & P. Of course it was coming off the March 11th lows.
Will have to see if the May 1st to October 31 period will be a underperforming period.
It just seems as though we're building up to a peak right at the
Historic beginning of the bad six month period.
A classic seasonal top?
-- posted by hairie31
» Normxxx - In Your Face--
In Your Face-- What had been tailwinds for stocks are shifting to headwinds
By MICHAEL SANTOLI, Barron's | 26 April 2004
A 40% SURGE IN THE STOCK MARKET in one year can only happen with a little help from some big trends.
Whether characterized as fortuitous economic tailwinds, massive coordinated stimulus, a global reflation or just a "sweet spot" in the business cycle for equities, large economic forces have fostered a nearly ideal environment for stocks since the market bottomed in March 2003.
The Federal Reserve has squeezed interest rates to 40-year lows, encouraging investors to drive money into risky assets and allowing companies to reduce borrowing costs. Inflation has dripped lower. Government deficits -- boosted by investor-friendly tax cuts -- added hundreds of billions in stimulus. And all the while, labor costs receded and the dollar declined, driving tremendous growth in U.S. companies' profits.
Though it's always hard to pinpoint major shifts in economic storm fronts, there are good reasons to believe that the market's weather vane is indicating these helpful tailwinds will soon turn to become headwinds.
While such a shift doesn't necessarily portend a major reversal in stock prices, history suggests that the market will likely become stingier with its blessings, both in the magnitude of future returns and the number of stocks that will thrive.
The stock indexes have been stalemated, in fact, since the strong March employment report was released on April 2, which left investors bracing for higher interest rates, boosted the dollar, and was followed by indications that inflation was stirring.
It should be noted that the stock market has flinched several times before in expectation of being hit with a hike in official interest rates, but the blow has yet to come.
Fed Chairman Alan Greenspan's two days of public testimony last week first inflamed those familiar concerns and then soothed them. And, certainly, a few weaker economic data releases and some palliative talk from Fed officials could restore a bid to Treasury prices and stocks for a while.
Still, the jump in the yield on the benchmark 10-year Treasury note from a March low of 3.68% to the recent 4.37% suggests the market believes there's a lot more room for rates to rise than to fall. And the larger-than-expected increase in consumer prices last month seems to have put the bond market on acute inflation alert, lending an upward bias in interest rates.
Bullish market analysts have been busily crafting arguments that stocks need not suffer as interest rates rise. A rough consensus among strategists seems to be that higher stock prices can coexist with rising rates, perhaps until the 10-year Treasury yield reaches 5% or so.
History is rather clear, though, in its verdict that stocks are at a disadvantage as monetary conditions tighten.
Bear Stearns strategist Francois Trahan notes that the vast majority of all stock-market appreciation since 1970 has occurred while market interest rates were falling. In months when rates were declining, the Standard & Poor's 500 rose at an annualized rate of 6.9%. In months when rates were climbing, the annualized return slips to 1.4%.
<img border="0" src="http://online.wsj.com/public/resources/i..." align="RIGHT" alt="[Good as It Gets]" height="629" width="238">
Russ Koesterich of State Street Global Advisors looked at stock market behavior following a low in the federal funds rate. Since 1954, he says, stocks have tended to form a top and decline anywhere from five to 17 months following the final cut in the funds rate. The presumed last rate cut was last June, or 10 months ago, suggesting that the rally is aging fairly rapidly.
The potential sting of higher rates, by one way of thinking, could be more intense this time around due to the all-time high proportion of financial shares in the stock indexes. Financials make up about 22% of the S&P 500's market capitalization, compared to about 15% in 1994, the last time the Fed embarked on a tightening cycle.
Bulls are fond of saying that banks and other financial companies' earnings are not nearly as vulnerable to rising rates as they were in the past. That may be true, but higher rates amount to a mandated increase in the cost of banks' main product -- money -- and as such can hardly help.
In any case, financial stocks are reliably slowed by higher rates. Trahan calculates that in months with rising rates, financial shares have dropped at an annualized rate of 1.4% since 1970, versus 10.5% annualized gains in months featuring declining rates.
There's always the chance, of course, that the widely expected rise in rates will be forestalled, or that the adverse effect of tighter money won't exert a downward pull on stocks for some time.
Jim Griffin of ING Investment Management, among others, believes there is a window in time during the shift toward higher rates and inflation when good stock-market performance will still be possible before any reckoning occurs.
"There is plenty of room for the economy to expand before exerting pressure on resources," he says. "There is plenty of room for the Fed to become less easy without becoming tight."
Greenspan himself Wednesday cautioned against assuming that any move to boost rates would augur a rapid series of additional tightening moves. And Fed Governor Ben Bernanke set a high hurdle Thursday for the Fed to act, saying inflation should stay between 1% and 2% this year and monthly job additions would need to surpass 330,000 before indicating labor market "stability."
Aside from interest rates, though, there's a separate concern for investors. The pace of economic acceleration and profit growth both appear to be cresting for the time being.
The percentage rise in the leading economic indicators has dipped for two straight months. Corporate profits, expected to surge close to 20% in the current reporting period over last year, are forecast to increase at a markedly slower rate the rest of the year.
And a key measure of economic momentum, the Institute for Supply Management's manufacturing index, recently hit a 20-year high, near levels that in the past have marked a peak. Trahan notes that in the 12 months leading up to a peak in the ISM index, the S&P 500 delivers average returns of 15%. The year following a peak, the market has shown a small decline, on average.
The middling reaction to the acceleration in job growth and to generally stellar first-quarter earnings reports also prompts questions about whether the market has taken full account of this bounty and is preparing for less impressive results.
Smith Barney strategist Tobias Levkovich has been cautioning for some time that corporate profit margins have soared to historic highs, which forces the issue of how much higher they can be expected to go.
In such environments in the past, it has paid to become more defensive in stock-sector allocation, lightening up on technology and cyclical stocks and moving toward stable consumer staples, energy and health-care issues.
Greenspan intimated to Congress that, at some point, companies will no longer be able to ride productivity gains to ever-higher earnings. "If history is any guide, competitive pressures, at some point, will shift in favor of real hourly compensation at the expense of corporate profits," he counseled.
Of course, if the market does in fact hit a rough patch, all these shifting economic forces could merely end up being the easy culprits rather than the root causes.
One major tailwind for the market has been a post-bubble pattern exhibited in earlier periods following severe bear markets, in which stocks recover powerfully for an average of 16 months or so. If the March 2003 low is considered the bear market end, the market is now at 13 months into its recovery, and counting.
[Normxxx Here: Or, about 19 months from October 2002, but who's counting? ]
-- posted by Normxxx
» hairie31 - Russell 2000: Big double Top???
*While the VTSMX, as of now, appears to have peaked at 27.30 on March 5, 2004.
Perhaps something more interesting is a gigantic double top on the Russell 2000.
The Russell hit all-time closing high of 606.39 on April 5, 2004. The previous closing high was 606.05 on March 9, 2000. That's 4 years and 1 month between tops.
The Russell's low was 327.04 on October 9, 2002. It lost -46 % in the bear market and gained +85 % since October 9, 2002.
http://finance.yahoo.com/q/bc?s=^RUT&t=5y&l=on&z=m&q=l&c=>Russell 2000 (1999-2004)
So the Russell is now flat for the 2000-2004 period so far.
Is this gigantic "double top", a sign the Russell and the market are about ready to crash?
It's certainly a chart that's worth looking at and I value everyone's opinion on what this chart looks like and how significant this chart could be?
-- posted by hairie31
» Normxxx - Re: Russell 2000: Big double Top???
In response to message posted by hairie31:As you know, I am NOT a bull-- even last year, when I should have been.
However, all of the actual research on H&S that I've seen indicates that its portents are insignificant to none.
Anybody have more than old wives tales about H&S?
-- posted by Normxxx
» Normxxx - Re: Re: Russell 2000: Big double Top???
In response to message posted by Normxxx:As you can see, we have this gorgeous reverse H&S pattern in Silver, which is supposed to take it to $11.50 or thereabouts. But, apparently, Silver hasn't read the charts lately. It dropped (like the proverbial rock) by almost a dollar last week, and has fallen over $2.00 in value (~25%) in just 13 trading days.
<img width="560" src="http://www.dani2989.com/gold/silverlt260...">
-- posted by Normxxx
» hairie31 - AAII: 70.22, Investor Intell: 69.06
*Latest Sentiment figures show:
AAII: 70.22
Bulls 50, Bears 21.2
Investors Intelligence: 69.06
Bulls 50, Bears 22.4
Both are very close reading and still very bullish.
For the past two weeks, every day a different well-known speculative high-tech stocks has been declining 10 to 25 % in a day.
However I think it's spilling over into the Intels and Ciscos.
On Friday, INTC, CSCO and NOK broke resistance levels and closed at new lows.
Also on Friday, the Nasdaq fell below it's 200 day moving average which is a bearish sign. The Nasdaq was down -6.2 % for the week. The worse week in 2 years.
From their 2004 peaks, here is how the decline looks so far:
Dow: (-4.76)
S&P (-4.35)
VTSMX (-4.65)
Nasdaq (-10.84)
QQQ (-9.74)
-------------
MSFT (-11.72)
INTC (-24.80)
CSCO (-28.21)
NOK (-38.54)
-- posted by hairie31
» hairie31 - Seasonal Returns: Oct 31 to Apr 30
*With the ending of the "Good" Seasonal six month period (October 31, 2003 to April 30, 2004) the returns were modest to negative.
Dow: + 4.2
S & P + 5.38
Nasdaq: (-.62)
QQQs: (-.93)
------------
MSFT (-.34)
INTC (-22.03)
CSCO (-.33)
NOK (-16.01)
The "Bad" Six month period begins on Monday.
-- posted by hairie31
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