Friday Market Sentiment part 2
Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged. | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |
Brent Leonard is taking a week off, so there are no legal insider-trading stats this week, but Investor's Intelligence is still reporting that insider activity remains favorable. Many of the worst performing industries have the best insider activity such as banks, retail auto, homebuilding, newspapers, office equipment. These insiders are betting their own money on a recovery in these groups which means they aren't seeing a prolonged downturn in the economy.
The ECRI leading economic index ticked up this week reversing last week's tick lower. That's a relief. Now the index has hit a 14-week high although still at recession levels. The ECRI measure of economic growth remains just above zero which I guess means that so far this quarter is a lot like last quarter, about .5% growth. The future inflation gauge remains at low levels and hasn't changed much recently.
I just completed a trial subscription to Trim Tabs and discovered the subscription price is tens of thousands of dollars so needless to say I won't have their data to report. Odd that they would offer free trials to the public but price their product to limit it to hedge funds and institutions. Anyway, it was some of the best material I have ever read on forecasting the market. There were no lame charts with MACD or Stochastics like you usually get. This was down and dirty research on government tax receipts, employment, liquidity flows, etc., and used to see the true economy rather than rely on questionable government reporting or AP headlines.
Here is a chart I meant to show yesterday, but didn't because my two martini Friday got in the way. Also, I recovered the Tuesday comments and it is now posted.
Interesting that this ratio, that I stole from Bill Luby (Vix and More), spiked way over the level of Sep-11, but now looks to recover back into the bullish level more quickly. So the emotional spike was greater, but didn't last as long. Very interesting.
Let's see if the ratio really does break below. Notice that in 2002 it tested the lows then ran up and stayed elevated for a couple years.
The Bob Brinker indicator says that the bull market is alive and well. That is the long-term uptrend of the 60-day off the lows of 2000. If you believe in this indicator, it says that as long as it keeps rising longer-term, there is adequate skepticism to keep the bull alive. Notice the declines in the 1997-2000 predicted the top in the market. But this is just one indicator among many to look at, so you can't use it in isolation.
I use this indicator more for the intermediate term trend, and it is saying there are more gains ahead. As the indicator declines from its peak, stock prices generally rise. Of course, as a reminder, this indicator failed miserably last fall and winter. Like I said, you can't use it in isolation and there are lot's of other factors to consider.
Above is Ken Tower's Vix. Like most people he watches the VIX to make sure it is declining while stocks are rising. So the general trend has favored higher stock prices. But notice the market stalled this week as the VIX hit a low and retraced up for five days. So far it has held under the 21-day which is Tower's line the sand for the short-term trend. As long as the VIX is under the 21-day, and the S&P equity index remains above the 21-day, then the short-term uptrend is intact. A divergence would mean it is time to take profits or hedge.
Tower also like the chances for the longer-term trend based on this chart. He believes that the break below the 200-day is a very good sign for the market, and that if we were in a bear market the 200-day would have held as support. Tower isn't a raging bull though. He thinks the unwinding of credit swaps and mortgage write downs will take a long time and keep a lid on prices longer than most people think.
