Is the market weakness temporary?

The market closed down for the week but up for the month -- and the last 3 months too.

By Jim Van Meerten May 2, 2010 12:19PM
Time for Financial Tides' weekly stock market wrap-up. April was a good month but the past week wasn't a good week. Too much news about Greece, Goldman Sachs and the Gulf oil spills. Bummer! Let's use our 3 standard yardsticks from Barchart to quantify the damage and then move on.

Value Line Index: Contains 1700 stocks, so it's much broader than the S&P 500 or the even narrower Dow 30 -- down for the week but up for the month
  • Index down 3.16% for the week but still up 4.94% for the month
  • The Index closed Friday below its 20 day moving average but above its 50 & 100 DMA
  • Barchart technical signals have a 40% short term sell but an 8% overall buy signal
  • Index was positive 3 months in a row

Barchart Market Momentum: The percentage of stocks closing above their daily moving averages for various time periods -- above 50% means a rising tide floats all boats -- slight weakness this week

  • 20 DMA -- only 48.96% closed above -- 77.93% last week -- 64.63% last month
  • 50 DMA -- 72.10% closed above -- 85.00% last week -- 82.15% last month
  • 100 DMA -- 80.05% closed above -- 86.23% last week -- 81.31% last month

Ratio of stocks hitting new highs to stocks hitting new lows -- 1.0+ bullish, 1.0 neutral, below .99 bearish -- still a bullish sign for this week

  • 20 day ratio of new highs/new lows -- 1297/790 = 1.61
  • 65 day ratio of new highs/new lows -- 978/177 = 5.52
  • 100 day ratio of new highs/new lows -- 837/391 = 2.14

Investment Strategy: Although the market ended weak for the week we are still above the 50 day moving averages. Don't be afraid to trim weak stocks ( those trading below their 50 day moving average ) but cautious investors might want to wait till later in the week to see how long the effects of bad news might linger. Long term investors might see this slight dip as an opportunity to pick up a few bargains.

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

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