Market surprise

The market regained some of its losses but we are still not out of the woods. Maybe it's time to short the euro?

By Jim Van Meerten Feb 15, 2010 1:23PM
Each weekend I always step back and try to cut through all the noise and see what the state of the market really is. I use Barchart to get all my data and try to use a consistent methodology so I get the feel of what is really happening. Let's look at the 3 sets of data I use to see where we're at this week.

Value Line Index -- this uses 1,700 stocks so it's much broader than the narrower S&P 500 or Dow 30 -- is up 2.54% this week.  Last month it was down 2.89% but up 1.57% so far this month -- let's call it recovering
  • Barchart's technical indicators signal a buy on only five of the 13 signals for an overall rating of hold.
  • The index closed Friday above its 100-day moving average but is still below its 20 and 50 DMA

Barchart market momentum indicator -- normally covers approximately 6,000 stocks --the percentage of stocks closing above their daily moving averages for various time frames -- still weak but improving.

  • 20 DMA -- 42.01% closed above -- last week it was only 20.01%
  • 50 DMA -- 43.42% closed above -- last week it was only 35.31%
  • 100 DMA -- 54.84% closed above -- last week it was only 45.63%

Ratio of stocks hitting new highs to stocks hitting new lows for various periods -- 1.0+ bullish, 1.0 neutral, below .99 bearish -- we have 1 bearish and 2 bullish signals

  • 20 day ratio of stocks hitting new highs to new lows -- 434/474 = .92
  • 65 day ratio of stocks hitting new highs to new lows -- 246/209 = 1.18
  • 100 day ratio of stocks hitting new highs to new lows -- 194/149 = 1.30

Summary - the market shows improving numbers but has still not returned to the level where I feel comfortable. When at least 50% of the stocks are trading above their recent daily moving averages then you have a better than 50/50 chance of having your portfolio increase. There is a lot going on over there in Europe and we seem to be improving faster than they are. Greece is a problem and I'm afraid that we may see problems in Portugal, Spain and maybe even France. My biggest fear is not the economic turmoil but maybe some civil unrest. If there are large numbers of men ages 18-40 unemployed and they begin to blame their governments for their plight we might see riots like we saw in some of the poorer parts of Paris a few years ago. Nothing good can happen during civil unrest. That leads me to my next investment.

 

Next week's strategy -- Since our economy has a jump on Europe I'm going to short the Euro. I'll do that by adding 500 shares of EUO - the ProShare Ultrashort Euro ETF - Right now the Euro is at 1.359. Back a few years ago I can remember when it traded at .85. If that happened again since this is a leveraged ETF I could see a gain of up to 120% on this trade.

Wall Street Survivor results -- This month I look like a champ so far. The S&P 500 is up .15% and I'm up 4.52% with the next competitor the Motley Fool All Stars up .57%. I'm still down for the lifetime of this contest but I'm trying to catch up. We've all seen how rankings can change at the drop of a hat. Wish me luck.

 

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email JimVanMeerten@gmail.com

 

Disclosure -- I do not hold any positions in the stocks in my Wall Street Survivor portfolio at the time of publication.

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