Saturday Bullish Percents
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 |
'He [Buffett] said the presidency is not unlike running a business. "They say in the stock market, buy into a business that's doing so well an idiot could run it, because sooner or later, one will. The US is sort of like that." ' [AP, May-22-2008]
ECRI Recession Watch:
If you base your major, life-altering, financial decisions on squiggly lines, then you'll love this new chart from ECRI. While the general economy continues to sink, the leading indicators are showing signs of strength. These are smoothed averages, and unfortunately, the weekly leading data has dropped two weeks in a row. I'd say that the price of oil has cut off the slight rebound in the economy, and we are back to a no-growth situation.
Trim Tabs keeps sending me their emails even though I think the trial is over. Their data is terrific and the commentary is even better. Yesterday's email was a bit odd though. They ranted a bit about the possibility of oil price manipulation. They are recommending that governments of oil consuming nations begin shorting oil futures to drive down the price. These guys are insiders. If they think prices are being manipulated, then there might be something to it. But, as interesting as it is, I'm not seeing how any of it helps me with my investment decisions.
Trim Tabs keeps a very close eye on tax receipts and payroll withholdings with the idea that the real driver of higher stock prices is liquidity and employment. This past week they noted a serious drop in withholdings but they suspect some sort of government collection problem. However, they also note a drop in employment ads, weak company buybacks, and no cash takeovers which leaves them neutral on the market and in cash until they can sort out what is going on.
Enough about Trim Tabs. As for HeadlineCharts, there is a cash cushion of 10% that will likely be deployed in the best areas of the market if the pullback is substantial enough and the breadth indicators behave. Right now, natural gas and coal seem like the best place to be if the price is right.
Ken Tower has read this market perfectly. He went bullish at just the right time, went neutral a month later but remained invested until this past Monday when he issued a sell and took profits and hedged. Now he is looking for a normal pullback to the lows of the trading range. He doesn't see this current selloff as serious but remains cautious about the longer term since he thinks the credit crisis needs a lot more time to unwind than most people think.
I forgot to pick up IBD today so I'm not sure if they have changed their market outlook. If you know, please send me a note.
Red is a column of O's in a downtrend, blue is a column of X's in an uptrend. Below 30% is oversold, and above 70% is overbought. Yellow is a shift down, green is up.
The IBD index took a big hit this week signaling that even the best stocks are under pressure. However, most major indexes remain above the important 50% level despite some serious selling.
Financials were the worst hit by the selling, but they also remain above 50%. I don't expect that to last, and before this correction is over I would expect financials to at least touch the 30-40% range. The test will be to see if the financials can remain above the 30% level as a sign of underlying strength and a bullish signal on the general market.
There was a shift back to the defensive groups this week, utilities, healthcare, staples, and as you can see these groups suffered no damage in the bullish percents. I took a position in healthcare this week because it looks like this group may have bottomed out for now.
I'm loving the strength in timber-related stocks. This group was very oversold and I took a large position as a value bet. Nukes and Uranium are perking up with the record prices in oil. I've owned these for a while and plan to lock them away in the portfolio for a long time. However, I'm also noting a need to be cautious in this group as the disaster in China reminds. There were some headlines that the government was trying to make sure there were no radioactive leaks... if there were, would we be told the truth?
As mentioned, keep this chart on the radar. We need to see a higher low in this indicator to continue to believe in this bull market.
Keep up the great work.
Aviator
http://reactivechartist.blogspot.com/ (Comment this)