I'm predicting an up market

With leading economic indicators and the stock market going up, I think this will be a great summer.

By Jim Van Meerten Jun 19, 2010 2:21PM
Last week the market got some legs under it. Each weekend I go back to Barchart to get the data for my three market yardsticks. This helps me clear my head of all the sensational headlines I've read during the past week and just look at the data. I use three because, although they usually move together, they each measure the market in different ways. So I think it gives me a more complete feel of what is happening. Let's see what they tell us.

Value Line Index -- Approximately 1,700 stocks, so it is much broader than the S&P 500 or the very narrow Dow 30: Up for the week.
  • The index was up 2.51% for the week
  • The index is up 1.13% for the month
  • The index has been up 3 weeks and down 2 weeks
  • The index closed Friday above its 20- and 100-day moving average but below its 50 DMA

Barchart Market Momentum -- The percentage of stocks closing above their daily moving averages for various time frames: Above 50% is always good.

  • Friday over 76.73% closed above the 20 DMA -- only 40.92% closed above the 50 DMA -- 51.44% closed above the 100 DMA
  • Last week over 55.12% closed above the 20 DMA -- only 26.90 closed above the 50 DMA -- only 41.13% closed above the 100 DMA
  • Last month only 9.26% closed above the 20 DMA -- only 17.09% closed above the 50 DMA -- only 33.95% closed above the 100 DMA

Ratio of stocks hitting new highs/new lows for various time frames -- 1.0+ bullish, 1.0 neutral, below 0.99 bearish. We've got some bullish signs here.

  • 1-month ratio of new highs/new lows -- 1367/231 = 5.92
  • 3-month ratio of new highs/new lows -- 276/140 = 1.97
  • 6-month ratio of new highs/new low -- 237/94 = 2.52

Bonus info: Once a month the Conference Board publishes its Leading Economic Index. The Leading Economic Indicators were positive 0.4%, Coincident Economic Indicators positive 0.4% and Lagging Economic Indicators negative only 0.1%. That's a great sign that the economy is in recovery.

 

Summary and Investment Strategy: All three of my yardsticks have positive results, and the Conference Board's economic indicators show the economy is in recovery. I'll still trim any underperforming stocks, but I intend to stay fully invested.

 

Jim Van Meerten is an investor who writes on financial matters on Financial Tides, Barchart Portfolio Blogs, Seeking Alpha, Marketocracy and MSN Top Stocks. Please leave a comment below or email JimVanMeerten@gmail.com

 

Disclosure: No positions in the stocks mentioned at the time of publication.

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