Weak ending for the week

The downward roller coaster ride continued

By Jim Van Meerten Jul 16, 2010 7:44PM
OK. Time for the reality check. If you had listened to the talking heads at the beginning of the week you night have thought the market was in a full recovery mode but it ran out of gas toward the end of the week. We have been on a roller coaster ride since the beginning of May, but it has been the downward portion of the ride. Remember to use the 3 yard sticks I've developed from the data on Barchart because every sample has some error in it and doesn't tell the whole story. So where are we?

Value Line Index-- Contains 1700 stocks so I think it is a better representation of the market than the S&P 500 or the even narrower Dow 30 -- down 4 days out of 5

  • Although we are up by 5.75% since the beginning of the month we are down 6.54% for the last month
  • 80% Barchart technical sell signal
  • Closed Friday below its 20, 50 and 100 day moving average
  • Barchart Trend Spotter (tm) sell signal

Barchart Market Momentum -- Contains approximately 6000 stocks -- Percentage of stocks closing above the Daily Moving Averages (DMA) for various time frames -- Needs to be above 50% for me to get excited -- I'm not excited this week

  • This week only 41.57% closed above their 20 DMA, only 40.33% closed above their 50 DMA, only 33.59% closed above their 100 DMA
  • Last week over 52.76% closed above their 20 DMA, only 43.43% closed above their 50 DMA, only 38.40% closed above their 100 DMA
  • Last month over 72.26% closed above their 20 DMA, only 39.32% closed above their 100 DMA, over 50.57% closed above their 100 DMA

Ratio of stocks hitting new highs/new lows for various time frames -- 1.0+ bullish, 1.0 neutral, below .99 bearish -- Short term more lows than highs

  • 1 month new highs/new lows -- 513/550 = .93
  • 3 month new highs/new lows -- 276/301 = .92
  • 6 month new highs/new lows -- 1.28

Summary and Investment Strategy -- All 3 yard sticks were negative in the short term this week. I will continue to trim stocks from my portfolios that are not beating the market. If I find some bond funds or stocks fighting the trend I might average in but I'm not in a mood to bottom fish. Time to use extreme caution.

 

Jim Van Meerten is an investor who writes on investing here and on Barchart Portfolio Blogs. Please leave a comment below or email JimVanMeerten@gmail.com.

 

Disclosure: No positions in the stock mentioned at the time of publication

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