Is the hot air from Washington deflating your portfolio?

The market is not reacting to the numbers from the economy, positive earnings or job numbers but by the hot air spewing from Washington. In this time of uncertainty maybe Robert Stovall's Super Bowl indicator is the answer.

By Jim Van Meerten Feb 7, 2010 3:03PM
I just returned from a week in Orlando at the Money Show. The speakers were terrific and I came back with a lot of good ideas that I'll share in the coming weeks. I'm not sure what happened to your portfolio but I came back to a lot of triggered stop losses. My Wall Street Survivor portfolio is down 1.97% for the month which puts me back in 6th place behind this months winner so far, Tobin Smith who has a 1.56% gain.

Most speakers at the Money Show had different opinions on the market, how to play it and what's in store for the next 6 months but one thing they all agreed on was that earnings, the economy and job numbers are not being properly factored into this market. Things are improving but every time someone in Washington opens their mouth the hot air deflates the market. Is the hot air deflating your portfolio?

Let's take a step back and see how the market did. As usual I'll use Barchart for my data.

Value Line Index -- I use this index because it contains 1700 stocks making it broader than the narrower Dow 30 or the S&P 500 -- this week down by .95%
  • Barchart's technical indicators signal a 40% sell signal -- 3 buys, 2 holds and 8 sells
  • The index closed Friday below its 20, 50 & 100 day moving averages for the first time in many months

Barchart's market momentum indicator -- approximately 6000 stock are used -- the percentage of stocks closing above their daily moving averages for various time frames -- above 50% good but below 50% bad -- this week all 3 looked bad

  • 20 DMA -- only 20.08% closed above
  • 50 DMA -- only 35.45% closed above
  • 100 DMA -- only 45.78 closed above

Ratio of stocks hitting new highs to stocks hitting new lows for various time periods -- 1.0+ bullish, 1.0 neutral, below .99 bearish -- this week all 3 time frames were very bearish

  • 20 day ratio of new highs to new lows -- 278/3660 = .08
  • 50 day ration of new highs to new lows -- 152/1733 = .09
  • 100 day ratio of new highs to new lows -- 74/962 = .08

Summary -- The market is reacting very negatively to the hot air spewing out of Washington. The improving economy, job numbers and earnings are being overshadowed by the threats coming out of the White House. Isn't it ironic that Obama took all the campaign handouts from Wall Street, the banks and hedge fund managers and now spends his time demonizing them and telling the common folk how he will punish them. This week I'll trim non-performing stocks from my portfolios but I'll hold up replacing them till I see a little bit of support in the market numbers.

 

Alternative strategy -- At the Money Show I ran into 2 of my all time Wall Street heroes -- Robert Stovall and Paul Kangas. Both these guys are going strong and still giving us all some productive and sane advice. Since it's Super Bowl Sunday it might be time to give a return visit to Mister Stovall's Super Bowl indicator. He's observed that the winner of the Super Bowl predicts the performance of the market for the rest of the year. If the NFL wins he can look forward to an up market, if the AFL wins the market will perform poorly. Don't laugh; the indicator has been correct for 34 of the last 43 Super Bowls. Before you go to bed tonight the Bowl game winner will be determined and you'll know how to play the market. I'm not taking sides, I just want to know whether to go long or short.

 

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 have no positions in the stock in my Wall Street Survivor portfolio

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

124
124 rated 1
266
266 rated 2
452
452 rated 3
702
702 rated 4
671
671 rated 5
604
604 rated 6
640
640 rated 7
495
495 rated 8
267
267 rated 9
158
158 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ABBVABBVIE Inc10
ATVIACTIVISION BLIZZARD Inc10
CTSHCOGNIZANT TECHNOLOGY SOLUTIONS10
LUVSOUTHWEST AIRLINES CO.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.