With the major indexes hitting new highs we are seeing more bullishness in the financial markets.  Here is the most recent Economist Magazine Cover.  (click to enlarge)

These bullish covers are normal when the stock market is hitting on all cylinders.  This past week we saw the short-term indicators move back to a column of X’s reflecting the new demand that is coming into the market.  Consensus believes that as long as the Fed continues with their low interest policy, the equity risk premium (return you get from taking risk with stocks versus “risk free” government bonds) is in favor of stocks.  That means more money will flow into stocks than low interest government bonds.  That $80 billion a month the Fed is pumping into the economy has to go somewhere.

We have seen some volatility in the technical indicators over the past 6 weeks.  The NYSE Bullish Percent went to defense on April 19 and now has slowly been moving higher but not enough to make the reversal back to offense.  The one indicator that has not budged is the Relative Strength Indicator which clearly has Domestic Equity in the number one spot.

There has recently been talk about the improving unemployment rate which has also been bullish for stock prices.  Here is information that helps explain where we sit as far as unemployment.  This is relevant because the Fed intends to keep interest rates low until unemployment gets below 6.50%.  (click to enlarge)

Here are the technical indicators:

NYSE BULLISH PERCENT:  The main coach is still in a column of O’s but getting closer to a reversal.  The reversal will happen at 74% and we are at 73.50%.  Should the reversal happen we would remain in a high risk market by being over 70% bullish.  Defense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE: This short-term indicator is in a column of X’s at a level of 75.58%.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks hit 58.10% in March and now resides at 57.32%.  This has remained in a column of X’s while the NYSE BP reversed down.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator has also been bouncing around.  It is back in a column of X’s and on a buy signal at a level of 61.68%.  Offense.

SECTOR DISTRIBUTION CHART:  Click image

We still have our Commodity sectors on the left side.  We did see the number of sectors in a column of X’s increase to 26 with 14 sectors in a column of O’s.  Both Oil Service and Oil Sectors reversed up.  You can see that demand in the price of gasoline.

DOW JONES CORPORATE BOND INDEX:  Last week we had the Dow Jones Corporate Bond Index reverse back to a column of O’s on the short-term chart.  The long-term chart remains in a column of X’s.  This change in the short-term chart suggests a more cautious approach to bonds.  We may see additional bond selling as money moves to stocks.

RELATIVE STRENGTH:  No changes here.  Current rankings are:  Domestic Equity, International Equity, Fixed Income, Foreign Currency, Cash and Commodity in last place where it has been since June 2012.

Email or give me a call with any questions.

We can’t seem to get enough participation from the buyers to keep this market moving higher.  The sellers are either there ready to sell or the buyers quit buying when we reach certain levels.  This is not unusual because when we get the bullish percent levels up to the 70′s, a lot of money has been invested and to get the next move up, we have to have new money or new people willing to come into the market and invest.  If prices were to fall, we would see that new money ready to move back in at lower prices.  When charting stocks you “see” how the resistance and support come into play.

Now that we are in the month of May I should make a comment about seasonality.  This attached chart shows the Dow performance from October 31 to April 30 for the past several years.

Consider this, if you were to invest $10,000 in the Dow Jones on May 1 and sell on October 31 each year since 1950, you would have lost money over the last 63 years!  Based on this, the entire growth of the  Dow Industrials since 1950 has effectively come in the “good” six months of the year (November through April).

Here are the technical indicators I follow.

NYSE BULLISH PERCENT:  The main coach is in a column of O’s suggesting caution.  The current reading is 69.11%.  This change to a column of O’s does not mean that stock prices have to fall but it does mean you should consider you current risk tolerance, objectives, and plan ahead.

NYSE 10 WEEK INDICATOR:  This short term indicator is back in a column of O’s and it has been very volatile lately.  This measures the percent of stocks trading above their 50 day moving average.  In January we had 90% of the NYSE stocks trading above their 50 day moving average and now we have 56.16%.  This is because some stocks are declining in price and of course the 50 day average price is much higher now.  Caution.

OTC BULLISH PERCENT:  This is the main coach for OTC stocks.  This has held up well but not as bullish as NYSE stocks.  We have 55.60% of the OTC stocks on point and figure buy signals.  This peaked at 60% in January 2011 while the Bullish Percent for NYSE stocks has moved well beyond this level.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator for OTC stocks is currently in a column of X’s so that is positive.  We have 57.84% of the OTC stocks trading above their 50 day moving average.  Offense.

SECTOR DISTRIBUTION CHART:  Click Image

We had 5 sectors move up and 5 sectors move down this week.  The average risk is now 59.99%.  We continue to have the commodity sectors showing low demand.  The green sectors are favored and those are areas to search for opportunities.

DOW JONES CORPORATE BOND INDEX:  The Dow Jones Corporate Bond Index continues to show demand for bonds.  This past week we had the stock market climbing while interest rates were dropping.  What do the bond traders know?  With a Fed induced bond market we can not use traditional methods for forecasting.  We will keep our eyes on this chart for direction.

RELATIVE STRENGTH:  Here are the ranking’s this week:  Domestic Equity, International Equity, Fixed Income, Foreign Currency, Cash and in last place Commodity.  The last change in these trends charts was in January when International Equity replaced Fixed Income for 2nd place.

It has been fun at our open house this week.  Please stop in sometime to see our new offices.

Today we continue with Domestic Equities in the top relative strength position.  The NYSE Bullish Percent is in a column of O’s (defense).  The 30 Week Indicator (Intermediate Indicator) just moved back to a column of X’s.  This is a longer term chart as it is following a 150 day moving average.  If this 30 Week Indicator declines below 60% we usually see  more significant sell offs.  The return to X’s is encouraging.  The NYSE 10 Week Indicator (Short Term Indicator) also just returned to a column of X’s and showed a double top buy signal after being on a sell signal since April 3.  More encouraging developments.  The longer term Positive Trend Chart (PT Chart) also remains positive.  This chart measures the percent of stocks that are trading north of their bullish support lines.  We have 70.87% of the NYSE stocks in positive trends.  In October 2011, we had 28% of the NYSE stocks trading above their trend line.  This chart moves very slowly.

The take away?  The risk condition for the US market remains high with enough warning signs to warrant caution.  We have been in a “high risk” market since the NYSE BP crossed 70% in February.  We have seen sectors ebb and flow with many, like the commodity sectors, becoming very oversold.  This “caution” position does not mean that the Dow has to fall.  Since most people watch the major indexes (like the Dow and the S&P 500) to get a sense of what is happening, I have shown a Dow chart below.  The support level of 14,450 is pretty evident on this chart.  The longer term support is 13,650 which is the trend line and the high set in October 2012.  A break above or below those levels will either continue the bullish trend or start a bearish trend with no way to predict what might happen.  Right now the trend is up for the Dow.

Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach is in a column of O’s showing there are fewer stocks on buy signals.  This column of O’s suggests defense.  This does not mean the major indexes have to fall.  They are cap weighted and their actual price level will be determined by a few large positions. This past week we also had the Optional Bullish Percent reverse down.  This indicator follows just those stocks that trade options so it is a small universe of stocks.  This reversal down is also a concern.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator reversed back into a column of X’s and also broke a double top on Wednesday.  This is an encouraging short term improvement.  Offense.

OTC BULLISH PERCENT:  This indicator follows those stocks that trade on the NASDAQ market.  It remains in a column of X’s at a level of 54.79%.  It hit 58.10% in March and has not been able to move any higher but has not reversed by 6% to 52%.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator for OTC stocks reversed back into a column of X’s on April 23 but remains in a sell signal.  Defense.

SECTOR DISTRIBUTION CHART:  Click image

The average risk is at 59.04%.  We had more slippage this week on this chart.  You can see the Computer Sector reversed back to a column of O’s this week.  We actually had 15 sectors decline and we now have 21 sectors on defense and 19 on offense.  Interesting isn’t it?  More sectors declining and major indexes rising–one has to change.

DOW JONES CORPORATE BOND INDEX:  No changes this week.  Long and short term charts on buy signals showing demand for corporate bonds.

RELATIVE STRENGTH:  I know this is getting boring–no changes.  Order of rank is Domestic Equity, International Equity Fixed Income, Foreign Currency, Cash and Commodity.  What will it take to move money into commodities again?

Next week are having an open house at our new offices at 51 Broadway.  Be sure to stop in and see us.  The open house hours are Tuesday, April 30 through Thursday, May 2 from 7:30am to 7:00pm.  I will be out tomorrow (Friday the 25th) helping with the flood fighting efforts in Fargo.  It looks like the fight will be easier than anticipated.  Call or email me any questions.

What we know is this move to defense suggests a more cautious strategy which can mean it is time to “weed the garden.”  If you have stocks that have not participated when the market is advancing it might be a good time to sell them to create cash for better buying opportunities in the future.  You might consider putting a sell stop order on individual positions to protect profit and/or capital.  You can consider selling partial positions to lock in profits.  You can buy protective puts (think insurance) to hedge the portfolio value against further declines.  There is no one right answer to how you should respond but with the defensive team on the field, I do not expect much in the way of stock market advances until the demand returns.  Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach reversed to defense on April 17.  The official reading was 68.69%.  When this indicator hits 68% (breaks through 70%) we will have a “bear alert” status which should give you an idea as to what to expect.  I caution you that this indicator does not predict what the Dow or S&P 500 might do.  I remember in 1998 when this indicator reversed to defense in May and the Dow Jones Industrial Average hit new highs in July but then hit the skids in August.  The NYSE BP is a terrible market timing indicator but it is effective at helping manage risk if that is appropriate.  Defense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator continued down this week.  As you remember, this was on a sell signal suggesting that many stocks were trading lower even though the major indexes (Dow and SPX) were not exhibiting weakness.  Defense at a level of 41.86%.

OTC BULLISH PERCENT:  The main coach for OTC stocks has managed to remain in a column of X’s and offense.  The current reading here is 55.46%.  This indicator has been lagging the NYSE BP for several years and we have not had a good representation from OTC stocks since the late 1990′s.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is also on a sell signal and defense.  We have 37.90% of the OTC stocks trading above their 50 day moving average.  In January we had 76% trading above their 50 day moving average.  Defense.

SECTOR DISTRIBUTION CHART: (click image)

The average risk has declined below 60% to hit 59.75%.  In December 2012, the average sector risk was 48%.  We have seen 14 more sectors decline this week.  We have 16 sectors in a column of O’s and 24 sectors still in a column of X’s.  We still have many sectors above 70% but that does not mean they have to decline.  This is where you “watch” to see how Wall Street will respond.

DOW JONES CORPORATE BOND INDEX:  On April 5, the long term chart of the Dow Jones Corporate Bond Index reversed back into a column of X’s.  Why was demand picking up again for corporate bonds?  The short term chart reversed back into a column of O’s on March 19.  Interesting.

RELATIVE STRENGTH:  We continue with the same rankings we have had for several weeks.  The order of rank is:  Domestic Equity, International Equity, Fixed Income, Foreign Currency, Cash and in last place Commodity.  The sell off in gold was not a big surprise based on the ranking for commodities.

Call or email me any questions.

We have seen a lot more volatility in the CBOE SPX Volatility Index (VIX).  Here is a chart showing our current readings.

In January 2013 we started at a level of 17.75.  This bottomed on March 11 at 11.50.  We hit 15.50 on April 5 before declining again.  Something to watch.

Here are the technical indicators this week.

NYSE BULLISH PERCENT:  The main coach continues to suggest offense.  We have seen a bit of a pull back in this chart but not enough for a reversal.  Offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term chart has been bouncing around.  It is currently on a sell signal but back in a column of X’s.  This suggests some caution because fewer stocks are trading above their 50 day moving average.

OTC BULLISH PERCENT:  The Main Coach for OTC stocks remains on offense this week.  The current risk reading is 57.53%.

OTC % ABOVE 10 WEEK MOVING AVERAGE: This short term chart, like the NYSE 10 Week chart, is suggesting caution.  It did reverse back into a column of X’s this week but remains on a sell signal.

SECTOR DISTRIBUTION CHART:  Click Image

The average sector risk is at 63.25%.  We have 12 sectors in a column of O’s so there are some sectors that are not participating in the index rally.  Commodity sectors remain some of the lowest.

DOW JONES CORPORATE BOND INDEX:  The long term Corporate Bond chart did reverse back into a column of X’s and the short term chart is back on a buy signal suggesting demand for bonds.

RELATIVE STRENGTH:  The ranking’s are the same as last week and the for the past several weeks.  The order of relative strength is Domestic Equity, International Equity, Fixed Income, Foreign Currency, Cash and Commodity.

Let me know what questions you might have.  Drop me an email or call.

NYSE BULLISH PERCENT:  The main coach is still in a column of X’s suggesting offense.  We have discussed in the past how this tool is used to help investors determine risk.  Right now we have 73.27% of the NYSE stocks on buy signals.  This is down slightly from last week.  This past week we did have the World Bullish Percent reverse to a column of O’s so that is troubling.  This indicator follows stocks around the world and the reversal down is a concern.  We still have the S&P 500 Bullish Percent in a column of X’s so domestic equities are doing better right now.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator did break the double bottom I discussed last week.  This indicator is now on a sell signal and remains in a column of O’s.  This is gut check time for your individual stocks.  Defense short term.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on a buy signal.  We have 57.27% of the OTC stocks on buy signals.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is in a column of O’s and on a sell signal.  We have 47.47% of the OTC stocks trading above their 50 day moving average.  In January this was at 76% bullish.  Defense.

SECTOR DISTRIBUTION CHART:  Click Image

We had some sectors climb and some decline this week but there were no reversals.  The average risk is at 63.14%.  This hit a high of 64.88% bullish on March 16 and sits at 63.14% as of April 3.  This is where you will start to see sector rotation if it is going to happen.  We saw further selling in precious metals this week and that was already an out of favor sector.

DOW JONES CORPORATE BOND INDEX:  There are no changes in the chart from last week.

RELATIVE STRENGTH:   There are no changes in the relative strength order from last week.  The rankings are as follows:  Domestic Equity, International Equity, Fixed Income, Foreign Currency, Cash and Commodity.

Let me know if you have any questions on these indicators.

This past week we had both the NYSE and the OTC Ten Week Indicators reverse down.  These short term indicators are measuring the percent of stocks trading above their 10 week or 50 day moving average.  For the NYSE 10 Week Indicator we now have 66.27% of the NYSE stocks trading above their 50 day moving average.  Back in January we hit a high of 90% bullish.  This indicator reversed down on February 4 and eventually reached a level of 60% bullish.  It was during this time that we had a pull back in stock prices.  If this indicator breaks the 60% level that would be a short term sell signal so we will watch how it plays out.

We continue to have the main coaches on offense this week.  This has been the case since December 19, 2012.  While the main coach has been suggesting offense we have seen both individuals stocks and the major indexes continue to move higher.  Here is a look at the Dow Jones Industrial Average point and figure chart.  This has moved from 12,900 in December to the current level of 14,500.  Based on this chart, a double bottom sell signal would come at a level of 12,800.  That is a pretty significant decline.  I have also shown a 25 box chart and you can now see the technical support at a level of 14,400.  A break of this level would be a concern.

Here are the technical indicators this week.

NYSE BULLISH PERCENT:  The main coach remains on offense this week.  We have 74.61% of these stocks on buy signals.  As long as this remains in a column of X’s we remain positive on stock prices.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is in a column of O’s so a short term negative.  We will watch to see if it can stay above the 60% level.

OTC BULLISH PERCENT:  The main coach for OTC stocks is also suggesting offense.  We have 57.81% of the OTC stocks on buy signals.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is now in a column of O’s at a level of 57.46%.  It peaked at 76% in January.  A move below 56% would be a short term sell signal.

SECTOR DISTRIBUTION CHART:  Click Image

DOW JONES CORPORATE BOND INDEX:  This indicator in unchanged from last week.  The long term chart remains in a column of X’s and the short term chart is in a column of X’s as well.

RELATIVE STRENGTH:  This long term indicator is also unchanged but when we see moves they tend to be significant.  Here is the asset class relative strength order for this week:  Domestic Equity, International Equity, Fixed Income, Foreign Currency, Cash and Commodity.  Commodity has been in last place for several months now.

Call or email me any questions.  Have a blessed Easter.

Another trend we see today is a rising US dollar.  This tends to have an impact on certain sectors.  Here is a chart of the US Dollar Index.

This chart shows the US Dollar has been rising since May 2, 2011.  Here is some information on sectors that are impacted during strengthening and weakening dollar trends.  This can be helpful for individual stock selection.

Here are the indicators this week:
NYSE BULLISH PERCENT:  The main coach is firmly on offense with no signs of a change in direction.  We now have 75.22% of the NYSE stocks on buy signals.  Offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is at 70.27% level this week.  We are once again in the “high risk” level since we passed the 70% level.  This does not mean that the markets have to drop.  It is a sign of the demand that controls the short term picture now.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on offense as well.  We have 58.12% of the OTC stocks on buy signals.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is in a column of X’s at 61.83%.  Offense.

SECTOR DISTRIBUTION CHART:  Click Image

Most of the activity was higher with 9 sectors moving up and 2 sectors moving lower.  We now have 7 sectors in a column of O’s.  No demand for Precious Metals or Metals non ferrous yet.  Keep a close eye on these sectors above 70% as we move forward.  Eventually wall street will start sector rotation looking for value.

DOW JONES CORPORATE BOND INDEX:  The longer term picture is unchanged.  We remain on a long term buy signal for Corporate Bonds.  The short term chart has made a few changes recently.  We are back in a column of X’s with a triple bottom set at a level of 120.  This is good support so we will see how this plays out.

RELATIVE STRENGTH:  Since Relative Strength is a longer term picture we don’t get a lot of changes.  We continue with the same ranking’s as last week.  In the lead is Domestic Equity followed by International Equity, Fixed Income, Foreign Currency Cash and Commodity.  The past several weeks have seen no changes in these rankings.

Call me or email me with any questions.  Next week I will be publishing from our new Alerus location at 51 Broadway.  Stop in to see us when you can.

I remember sending out an email on March 10, 2009 showing a “picture” of the Sector Bullish Percent Chart.  It was the best looking chart I had seen since October 1987.  The best looking chart if you are looking to put money to work.  Here is a look at that date. The average risk was 13.66% bullish.  (Click Image)

In 2008, there were several changes in our technical indicators throughout the year.  On November 25, 2008 the NYSE Bullish Percent reversed to offense at a low risk level of 14.56%.  After reversing up, the NYSE BP quickly moved to a risk level of 65.68% bullish on January 6, 2009.  On January 14, 2009, the NYSE Bullish Percent reversed back to defense and we saw stock prices, including the DJIA drop.  The NYSE BP hit a low of 13.61% bullish on March 6, 2009 and made a reversal back to offense on March 12th and as they say at Bison football games, the march was on.

Predicting how long we will have an offensive market is not possible.  We may continue for several more months or we can start unwinding today.  Either way, we will watch these indicators to help manage the risk.  Here are the technical indicators at this time.

NYSE BULLISH PERCENT:  The main coach is still suggesting offense.  We are at a risk level of 75.31%.  Even as the short term indicators have waffled around, this indicator has remained firmly on offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is in a column of X’s and suggesting offense. We are at 71.15% bullish, still down from the 90% level hit in January.  The Dow is hitting new highs but the broader stock market has fewer stocks participating in the rally.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks suggests offense as well.  This indicator is at a risk level of 57.88% bullish.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is in a column of X’s at a risk level of 62.64%.  Offense.

SECTOR BULLISH PERCENT CHART:  Click Image

Compare this chart with the March 9, 2009 chart.  It is pretty easy to see the risk levels are higher today at a rate of 64.46%.  This past week all the activity in the sectors was higher.  We still have 34 sectors in a column of X’s.  This chart helps see the sector rotation that will eventually take place.

DOW JONES CORPORATE BOND INDEX:  We are continuing to see additional pressure on bond prices.  The longer term chart for the DJ Corporate Bond Index remains on offense but in a column of O’s and the short term chart has now given 3 double bottom sell signals.  This is a reason for caution on bonds.   People buy bonds for a variety of reasons but we can usually break down the reasons as follows:  income, appreciation, and preservation.  You can not get all three in one investment anymore. Brokered CDs, treasuries and municipal bonds used to offer all three but with the current fed policy, they no longer offer an income that is adequate for most investors.  Time to review bond holdings.

RELATIVE STRENGTH:  The asset classes remain in the same order as last week.  The two top relative strength asset classes are Domestic Equity and International Equity.  They are followed by Fixed Income, Foreign Currency, Cash and Commodity.  Domestic Equity has held the number one spot since September 24, 2011.

I had a good week last week.  I had a grandson born on March 8 (Asa Keith Burck, Jr.) and I enjoyed watching the Class B Basketball Tournament over the weekend.  It was 40 years ago that the Hillsboro Burros beat the Parshall Braves for the Class B championship.  I had an opportunity to be part of that winning team and as the years go by, the victory has become sweeter.

Give me a call or email me with any questions on these indicators.

Here is a long term look at the DJIA.

This chart shows the dates by month.  The numbers 1-9 represent January through September.  The letters A, B, C are October November and December.  This chart starts out at the 14,000 level in July and October 2007.  The Dow broke through the long term support line at 11,000 in September 2008.  The low of 6,600 was set in March 2009.  We remain in a bull trend having stayed above the 45 degree support line starting in March 2009.  In September and October 2012 we tested the support line two times.

After a big move in the stock market we start to see articles promoting the benefits of buying and holding stocks.  These articles suggest that if you miss the 20 best days in the market, you will do substantially worse than buying and holding.  Of course these articles tend not to mention what happens if you miss the worst 20 days.  For example, if you invested $100,000 in the DJIA in1985, your cumulative return through 2012 would have been 1062.02%.  The charts below show what happens when you miss the best 20 days and the worst 20 days.

DJIA from 1985 through 2012 missing the best 20 days:  Cumulative return 254.92%

DJIA from 1985 through 2012 missing the worst 20 days:  Cumulative return 5,122.55%

Now if you were to miss the best 20 days and the worst 20 days your cumulative return would have been 1,484.17%, still beating the buy and hold return of 1,062.02%.  Food for thought.

This past week we had the Bullish Percent for the NDX (Nasdaq non financial) reverse back to a column of X’s.  This index covers just 100 stocks so it tends to “move” faster than the S&P 500 Bullish Percent or the NYSE Bullish Percent.  This reversal is positive showing more demand.  Here are the rest of the indicators.

NYSE BULLISH PERCENT:  The main coach remains on offense.  The current risk level is 73.83%.  Offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is back in a column of X’s and it is at a risk level of 70.07%.  This hit a high of 90% in January and has pulled back.  This shows that there are fewer stocks participating in the advance that we had in January.  Column of X’s so offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks is also in a column of X’s at a level of 61.55%.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator remains in a column of O’s showing that OTC stocks are not participating at the same rate as NYSE stocks.  The column of O’s suggests short term caution.  The current risk level is 61.55%.

SECTOR DISTRIBUTION CHART:  Click Icon

We have 6 sectors in a column of O’s and 34 sectors in a column of X’s.  We have several sectors above the 70% level which reflects the demand we are seeing in stocks.  These sectors bear watching as these sectors are like the first ones Wall Street will sell if they want to raise cash.

DOW JONES CORPORATE BOND INDEX:  Same levels as last week.  I will alert you to any changes.

RELATIVE STRENGTH:  Same order as last week.  We have seen both Commodity and Currency fail the Cash bogey check.  The weakness in these sectors, relative to the other sectors is very evident.

Call or email me with any questions.

The major indexes continue to make slow progress after the fast run up from December through January.  The Dow has been in a trading range for the past month.  The Dow Jones Industrial Average (DJIA) has completed a shake out pattern followed by a triple top buy signal.  Here is a chart showing the pattern developing.

This chart is a bullish chart pattern however, we have been at the top end of the trading range for quite some time.  One concern, from a technical perspective, is the other major indexes like the S&P 500 and the Nasdaq have lagged behind the DJIA.  This suggests there are fewer stocks accounting for the strength in the markets than we had a few months ago.  This would also suggest being more conservative in your individual stock purchases.  This can mean waiting for pullbacks, putting in buy orders below the market price or buying partial positions to dollar cost average.  It can also mean taking some money off the table.  We have the CBOE Volatility Index (VIX) starting to show some higher lows suggesting more volatility.  See chart below.

Here are the technical indicators for this past week.

NYSE BULLISH PERCENT:  The main coach for NYSE stocks continues on offense.  The current risk level is 72.74%.  We reached a high of 74.06% on February 1 and although we have remained in the 70% level we have not been able to get any higher in the past month.  Offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator did manage to reverse back into a column of X’s on February 27.  The current risk level is 65.49%.  The short term picture has been struggling lately.  This suggests caution.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on offense as well. It hit 56% on February 14 and we remain at that level.  We have not been able to get any more new stocks to give point and figure buy signals showing a decrease in demand.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator remains in a column of O’s so another reason for caution.  The current risk level is 57.57%

SECTOR DISTRIBUTION CHART:  Click Image

We have a couple more sectors reversing down this past week.  They are the Oil Service and Chemical Sectors.  We now have 6 sectors that are in a column of O’s.  This is a good time to review the sector risk and try to get one step ahead of Wall Street should they begin to rotate with in the sectors.

DOW JONES CORPORATE BOND INDEX:  There has been some movement here.  The long term chart is still in a column of O’s but on a buy signal.  The short term chart is on a sell signal but now back in a column of X’s showing new demand for corporate bonds.  We will have to continue to monitor this chart for strategies on managing bond risk going forward.

RELATIVE STRENGTH:  The order of asset class relative strengths remains the same as last week.  That order is Domestic Equity, International Equity, Fixed Income, Foreign Currency, Cash and Commodity.  It was on January 25, 2013 that International Equity surpassed Fixed Income for the number 2 spot.  This coincides with the longer term Dow Jones Corporate Bond Index Chart going to a column of O’s.  These relative strength indicators are long term in nature.

Give me a call if you have any questions.

My recent technical comments have discussed that the short term picture is eroding.  We have the two short term indicators, (NYSE and OTC 10 Week Indicators) in a column of O’s and on a sell signal.  This suggest a more cautious approach to stock market risk.   As we get pull backs the risk/reward picture will improve.

Give me a call or email me with any questions.

What is starting to change is the percent of stocks trading above their 50 day moving average.  In November we had 22% of the NYSE stocks trading above their 50 day moving average.  When we have less than 30% of these stocks trading above their 50 day moving average it suggests a low risk market.  When we have over 70% of the NYSE stocks trading above their 50 day moving average, we say the market has high risk.  We hit a level of 90% bullish in January.  This indicator has subsequently reversed down and at this point, we have 73.45% of the NYSE stock exchange stocks trading above their 50 day moving average.  This reversed down on February 4 and we have not been able to make any new forward progress for this indicator.  The rubber band has been stretched too far and now it is relaxing back to a more normal risk level.

This is a good time to do a review of your positions, your risk tolerance, and your buying power.   If you have stocks that have not participated in the rally that started in December, you should consider “weeding the garden” so you can create cash to have buying power should we get a pull back.  No predictions, just observations.

Here is a chart I found interesting.  It is the S&P 500 and it shows the resistance that has been set at the 1500 level.

Here is another chart showing the money flows into the S&P 500. (click image)

Standard & Poor’s 500 Index more than doubled from the March 2009 lows even though money flowed out of stock funds most of the time. (Data source: Investment Company Institute)  In January, equity funds took in $19.6 billion. This was the largest inflow since ICI started tracking the data six years ago. During the prior 4 year rally, outflows exceeded $435 billion.

Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach for NYSE stocks remains on offense this week.  We have 75.20% of the NYSE stocks on buy signals.  No sign of a change at this time but from this higher risk level, it is appropriate to review your strategy for the future.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator was referenced above.  It remains in a column of O’s and we have been declining since February 4.  The current risk level is 73.45%.  A move below 70% would be a short term sell signal.

OTC BULLISH PERCENT:  The main coach for OTC stocks also remains on offense.  We have 56.75% of the OTC stocks on buy signals.  There is a smaller percent of OTC stocks on buy signals versus the NYSE stocks.  The last time we had 70% of the OTC stocks on buy signals was January 2004.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator moved into a column of O’s on February 15.  It broke the 70% level this week to close at 64.83%.  This short term sell signal gives credence to reviewing your strategy.  Defense.

DOW JONES CORPORATE BOND INDEX:  This indicator remains at the same levels as last week.  The long term chart remains on a buy signal but we are in a column of O’s.  The short term chart is on a point and figure sell signal so we suggest caution with regard to corporate bonds as we look for further confirmation of the longer term picture.

RELATIVE STRENGTH:  The relative strength rankings remain the same:  Domestic Equity, International Equity, Fixed Income, Foreign Currency, Cash and Commodity.  We continue to see money flow out of precious metals which is impacting the Commodity sector.

Call or email me any questions.

Here is another chart showing stock market performance since 12/31/1999.  Click to enlarge.

Should the Dow Jones Industrial Average break the previous high level of 14,198, we may see new demand for stocks.

Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach remains on offense at a level of 74.99%.  We remain at a “high risk” level.  This does not mean that the financial markets have to come down but rather investors should be in a more conservative attitude versus the 60% risk level we were at in December 2012.  It is also a good time to consider sell stop orders or creating a plan for a more defensive strategy should that be necessary.  Offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This 10 Week Indicator is still in a column of O’s at a level of 80.68%.  A move below 70% would be a short term sell signal.

OTC BULLISH PERCENT:  The main coach for OTC stocks suggests offense as well.  The risk level is 54% Bullish and a column of X’s.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator remains in a column of X’s but is also .80% away from reversing to a column of O’s.  The current risk level is 70.80%.

SECTOR DISTRIBUTION CHART:  Click Image

We did have one sector decline this week. That was the Protection and Safety Sector.  Precious Metals remains the only sector that is showing little demand.  The average risk is now 63.36%.  This is a good time to review your positions and begin to think two steps ahead as to how you might want to respond should demand start to diminish.

DOW JONES CORPORATE BOND INDEX:  Not much new here.  We do have the long term chart in a column of O’s suggesting caution but this long term chart remains on a buy signal.  The short term chart is in a column of O’s and on a sell signal so we need to watch corporate bond prices for direction.

RELATIVE STRENGTH: No change in the order of relative strength.  The International Equity asset class continues to gain strength.  The current relative strength order is Domestic Equity, International Equity, Fixed Income, Foreign Currency, Cash and Commodity in last place.

Call or email me any questions.

I bought and started reading a new book.  It is called “The Definitive Guide to Point and Figure” by Jeremy DePlessis.  It is a great read.  It does a nice job of covering the history of point and figure charting.  Here are a couple of sentences that ring true:  “The markets are driven by a constant fight between buyers and sellers.  It is the interaction of market participants and how they feel about all the available information that drives the price.  The important point to remember is that it’s the people that create the price; their fear and greed, their hope and prayers, and their opinions.”  And you thought it was price to earnings or cash flows or earnings growth—all those things analysts look at.

Investor psychology also results in the round number phenomena.  The Dow has hit the 14,000 round number level.  We have been flirting with the 14,000 level for several days now.  For us to make new progress on the Dow Jones Industrial Average, we will have to convincingly get above 14,000 to get a new trend.  Why 14,000 is any different than 14,100 or any other number is not relevant.  It is just how we think.

Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach for NYSE stocks remains on offense.  We now have 74.31% of the NYSE stocks on buy signals and there has been no change in demand.  Offense but at high risk.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator, after reaching 90%, has reversed in to a column of O’s at a level of 83.05%.  This is a reason to pay attention but we would not register a short term sell signal until this breaks below 70% bullish.  Caution but still on offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on offense.  The current risk level is at 55.46%.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator remains in a column of X’s at a risk level of 72.91%.  Offense.

SECTOR DISTRIBUTION CHART:  Click Image

As you can see, this chart has moved significantly to the right side.  We have just one sector remaining in a column of O’s.  It is Precious Metals at a risk level of 25%.  All the other sectors are in a column of X’s with an average risk of 62.71%.  There were 16 sectors that moved higher this past week.  We will see if sector rotation will start from here.

DOW JONES CORPORATE BOND INDEX:  I have commented on some of the changes we are seeing in the government bond market.  We are now seeing some of the longer government bonds move higher in yield and lower in price.  The Dow Jones Corporate Bond Index moved one box closer to giving a long term sell signal.  Here is a look at the long term DJ Corp Chart.  Should this give a sell signal, it would be appropriate to review longer term bond exposure to consider reducing risk.  The trend has been for higher prices for several years.

RELATIVE STRENGTH:  We have had no changes in the relative strength measures.  Here is the order:  Domestic Equity, International Equity, Fixed Income, Foreign Currency, Cash and Commodity.   The low relative strength reading for Commodity is reflected in the Precious Metals sector where we are seeing low demand.  We don’t have to know why but rather just accept what is.

Call or email me any questions on these indicators.

In recent weeks I have mentioned that the markets are getting overbought but we can remain overbought and can continue to become even more overbought as we move forward.  There is no way to know when the sellers might start taking control so we now have to become more diligent in our purchases.  If you have specific stocks you want to review give me a call.  Here are the technical indicators.

NYSE BULLISH PERCENT:  The main coach remains on offense with no sign of a slow down.  We have 73.23% of the NYSE stocks on point and figure buy signals.  We are in a “high risk” area but offensive.

NYSE % ABOVE 10 WEEK MOVING AVERAGE: This short term indicator is also in high risk territory.  We have 88.85% of the NYSE stocks trading above their 50 day moving average.  When this breaks below 70% we will have a short term sell signal.  That may not happen for a long time but no sense in guessing.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks is also suggesting offense.  We have 54.41% of the OTC stocks on buy signals.  The last time this indicator got to 70% was in January 2007.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is now at  level of 72.49%.  We will watch for the break below 70% as a warning sign to become more defensive with OTC stocks.  Offense for now.

SECTOR DISTRIBUTION CHART:  Click Image

The average risk has increased to 61.89%.  You can see we have become more skewed to the right side of the chart.  This is where you can watch sector rotation start to take place.  A break below 70% bullish for sectors suggests sellers are taking control of the sector.  We have only 2 sectors in a column of O’s.

DOW JONES CORPORATE BOND INDEX:  I reported earlier this week on some of the changes we are seeing in the demand for bonds.  The longer term charts for the Dow Jones Corporate Bond Index are still on a buy signal but the short term charts are suggesting caution.  Call me if you want to discuss strategies.

RELATIVE STRENGTH:  I also reported earlier that the Relative Strength for International Equity overtook Fixed Income.  Increasing your exposure to International Equities would make sense because of the improving momentum.  We remain with Domestic Equities in the #1 spot followed by International Equity, Fixed Income, Foreign Currency, Cash and Commodity.

Call or email me with any questions.

Currently the chart has reversed into a column of O’s.  This is a reason to start reviewing your bond strategy and make decisions accordingly.  Here is a shorter term chart as well.

This short term chart has now given two sell signals.

This past week we also saw the Relative Strength indicators change.  We have had Fixed Income in either the #1 or #2 spot since April 2012.  Now we have International Equity in the #2 spot and Fixed Income has dropped to number three.  This does not suggest that bonds are going to collapse.  It just reflects demand and how International Stocks are showing better Relative Strength.

Email or call me with any questions.

It is difficult to understand the relationship between the economy and the stock market.  Certainly the economy impacts corporate earnings in terms of revenue and costs.  Stock prices generally reflect investor expectations for future corporate earnings and future economic growth.  You would expect that there is a direct relationship between U.S. GDP growth and U.S. stock market performance.  It is sometimes hard to except that the stock market is a leading indicator and its movements should precede economic growth.  What you find is that stock prices and the economy do not always move in tandem.

The financial markets don’t wait for investors to feel good about the economy.  The stock market really doesn’t care about specific philosophies on stock prices.  Ultimately, stock prices will reflect supply and demand–are there more buyers  than sellers?  If so, prices will climb.  If there are more sellers than buyers, stock prices will fall.

At this time we have the offensive team on the field. This has been the case since December 19, 2012.  Our indicators have moved to high risk levels but they remain on offense and can remain on offense for extended periods of time.

The S&P 500 had a good return in 2012.  Here is a chart of the 5 largest market cap firms as a percentage of the S&P 500 index.  In a Barron’s article, they point out that when companies hit 5% of the S&P 500 index, it often acts as a cap on future valuation growth.  The Trader column points out that both “General Electric (GE) and ExxonMobil (XOM) neared the 5% level in the third quarter of 2000 and the first quarter of 2009 before dropping back.  IBM (IBM) got as high as 6% at the end of 1985.  That preceded a long down period for IBM in terms of its percentage of the S&P’s market value.”  Apple’s (AAPL) price at $700 was almost 5% of the S&P 500.  Will the 5% level become the top for Apple (AAPL)?  Their earnings release was not well accepted by investors–supply and demand.

Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach continues on offense.  The risk level has now moved to a level of 71.25%.  The last time we saw 70% was February 2012.  We stayed above 70% until April 2012.  Offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This chart hit the 90.40% level this week.  This represents the bullish nature of the stock market.  The last time we hit 90% was October 2010.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on offense at a risk level of 53.52%.  It always surprises me how few OTC stocks we have on point and figure buy signals.  Never the less, we are on offense and the risk level is not high.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is at 89.53%.  Offense.

SECTOR BULLISH PERCENT CHART:  Nov. 16, 2012 and Jan. 23, 2013

Here you can compare the sector risk from November 16, 2012 versus January 23, 2013.  We had 15 sectors move higher this week.  Only 3 sectors left in a column of O’s.  The average risk has climbed to a level of 60.74%.  Watch sectors above 70% for a change in demand.

DOW JONES CORPORATE BOND INDEX:  No change.  Government bonds still in demand.

RELATIVE STRENGTH:  The order of relative strength remains the same–Domestic Equities, Fixed Income, International Equity, Foreign Currency, Cash and Commodity.  Fixed Income is getting close to being moved out of second place by International Equity.

Email or call me with any questions.

I have attached a long term chart of the SPDR Dow Jones Industrial ETF (DIA).  To get the Dow Jones Industrial Average equivalent value you take this chart price times 100.  This chart goes back to the March 2009 lows.  The months are reflected numerically.  The months of October, November and December are A, B & C.  As you can see, this chart does not appear to be declining at this time.  We have resistance at this level which was set in September 2012.  A break above this resistance will likely mean further advances.

Here are the technical indicators this week.

NYSE BULLISH PERCENT:  The main coach remains on offense.  The current risk level is 69.09%.  When we get above 70% we enter a high risk market.  Does this mean we will get a decline after getting to 70%?  I don’t know–nobody does.  We can and have stayed above 70% for extended periods of time in the past.  We will have to monitor the buyers and sellers and make decisions accordingly.  Offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator declined slightly this week to a level of 85.89%.  A move below 70% would be a sell signal but no sign of that at this time.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks shows 52.30% of the OTC stocks on buy signals.  This chart also suggests offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term chart has 74.24% of the OTC stocks trading above their 50 day moving average.  No sign of a change at this time so this remains on offense.

SECTOR DISTRIBUTION CHART:  Click Image

We had 23 sectors move higher this week and no sectors declined.  We have 37 sectors in a column of X’s and offense and 3 sectors in a column of O’s and defense.  I am watching the Precious Metals sectors to see if we can get some demand moving this sector off the 30% level.  There are a lot of predictions for $2000 an once gold this year but that won’t happen with out some demand.

DOW JONES CORPORATE BOND INDEX:  No changes from last week.  Long term demand remains in control of bond prices.  I will report if we have any changes in this chart.

RELATIVE STRENGTH:  We have Domestic Equities in the number one spot for relative strength.  The number two spot is Fixed Income.  International Equity continues to gain in relative strength.  The last three spots are held by Foreign Currency, Cash and Commodity.  Relative Strength is a long term indicator and the changes in relative strength can speak volumes.

Call me with any questions on these indicators.

Last week I discussed how the beginning of a new year brings lots of predictions and articles about what is suppose to happen.  I don’t know if this is a prediction or reality but the Economist Magazine cover for January 5 is insightful–”America turns European”.  I am looking forward to a shorter work week and longer vacations!

With the offensive team on the field we expect higher stock prices.  I want to show you a “look” at the S&P 500 Weekly Distribution Chart.  This is helpful to see how over bought or over sold an indicator is.  For example, in May 2012, the SPX was 56% over sold.  In January 2012 we hit 46% over bought and remained over bought until March when a sell signal was given suggesting a decline.  It was on March 9, 2012 when the NYSE Bullish Percent went to defense for the first time in 2012.  The SPX Weekly Distribution Chart has worked it’s way back to 40% over bought.  We can remain over bought for some time (like January to March 2012) but it is helpful to know the current risk levels.  I don’t know how long we will be over bought or how much higher we will go but demand is in control.

Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach continues to remain on offense.  We have moved to a level of 66.79%.  Offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator has moved to a level of 84.49%.  We are getting close to the February 2012 high of 88% bullish.  Should this move below 70% it would be a short term sell signal.

OTC BULLISH PERCENT:  The main coach for OTC stocks is on offense and we moved to a current level of 51.04%.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This has moved above the 70% level as well.  We are now at 73.63% and on offense.

SECTOR DISTRIBUTION CHART:  Click Image

We had 30 sectors move up this week and we now have 35 sectors in a column of X’s.  Notice Precious Metals on the left side and on defense.  It is worth noting how many sectors we now have over 70% bullish.  This of course is a bullish sign and signs of trouble will come as these sectors start getting sold off (again).  Current risk level is 57.91%.

DOW JONES CORPORATE BOND INDEX:  The chart remains bullish for corporate bonds.  I have seen several predictions on interest rates for this next year.  Some are suggesting a further drop and other predictions are suggesting that rates will rise pretty significantly.  At this point the corporate bond market is not suggesting higher rates.  We have some selling pressure on treasuries which is likely the result of a stronger stock market.  Check out this chart;

RELATIVE STRENGTH:  No changes here.  Domestic Equities remains firmly in control with Fixed Income in the number 2 spot.  International Equities is building more momentum but not enough to unseat Fixed Income.  The last three asset classes, in order of relative strength, are Foreign Currency, Cash and Commodity.

Let me if you have any questions.

On Wednesday, the “fiscal cliff averted rally” had positive impacts on our technical indicators.  The last hold out to offense was the OTC Bullish Percent which managed to reverse back to a column of X’s with Wednesday’s action.  Each of the technical indicators I follow are in a column of X’s and suggesting demand.  The “risk levels” are normal–not extremely over bought or extremely over sold.  Trying to time the market is difficult at best.  Trying to determine market risk is easier.  Here are the risk indicators.

NYSE BULLISH PERCENT:  The main coach remains of offense.  We reversed back to offense on December 19.  We are now at a risk level of 63.38%.  When we get above 70% bullish we go to a high risk market.  Offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator remains in a column of X’s.  It is now at a risk level of 81.47%. With Wednesday’s action this indicator increased over 13%.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks reversed back to offense as of Wednesday January 2.  This indicator has been on defense since November 8.  This move to 48.73% is showing signs of demand but surprisingly, we still have less than half of the OTC stocks on point and figure buy signals.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicators is in a column of X’s at a risk level of 69.92%.  This was over a 10% move on Wednesday.  Offense.

SECTOR DISTRIBUTION CHART:  Click Image

Here is a look at the sector distribution chart. We have several sectors that have reversed up.  We have 29 sectors in a column of X’s and demand.  The average risk is 55.03%.  This is a “normal” looking chart–some sectors over 70% and some sectors below 30%.

DOW JONES CORPORATE BOND INDEX:  We continue to have the long term chart in a column of X’s and demand.  The short term chart recently gave a short term sell signal but has once again moved back into a column of X’s.  We are seeing more selling pressure on bonds and that is to be expected when the stock market starts moving higher.

RELATIVE STRENGTH:  Not too much different here.  The highest relative strength asset class is Domestic Equities.  This has stayed in the number one spot since October 2011.  The number two spot is controlled by Fixed Income.  International Equities now holds the number three spot having surpassed Foreign Currency.  Fourth place is held by Cash and finally we have Commodity in the number five spot.

Let me know if you have any questions on these indicators.  Also get ready for another media induced fight in Washington in February.  I think I liked it better when we did not know what was going on in Washington.  Happy New Year.

The Santa Claus Rally is the historically consistent gains for stocks that occur during the last 5 trading days of each December plus the first two trading days of January.  The Santa Claus Rally has recorded a 1.50% gain in the S&P 500 going back to 1953.  Also, the first five trading days of January gives us a heads up about what kind of year 2013 will be.  Over the past 39 years, whenever the first five trading days of January were up–the stock market recorded annual gains 84.60% of the time.  Likewise, if the month of January posts a gain, the S&P 500 has posted a yearly gain 88.70% of the time.

The shorted  trading days around Christmas and the New Year can create volatility.  We have seen the CBOE SPX Volatility Index (VIX) break a double top on December 27 suggesting more volatility with the chart hitting high of 23 after being at level of 15 at the end of November.  Clearly the noise about the fiscal cliff was/is having an impact on investors.  On December 31, the VIX did decline to a level of 18 where we have a double bottom. Here is a chart of the “fear factor” for stocks.  Fear creates opportunities.

We have also seen the NYSE Ten Week Indicator go from a low of 22% in November to a recent high of 72% on December 20.  On December 24, this short term indicator reversed back to a column of O’s and then as of December 31, we are back in a column of X’s.  These short term indicators are not really productive for most longer term investors but they are helpful to traders who want to play the short moves.

As we start out 2013 we have 60% of the NYSE stocks on point and figure buy signals and we are on offense.  At this time last year we had reversed back to a column of X’s and offense in December 6,3011.  We stayed on offense until April 10, 2012.  With the main coach suggesting offense and the seasonality of the stock market in our favor (November to May) it would seem logical to ignore the noise and follow Wall Street as they accumulate stock.

I will put out a full report on Thursday.  Please call or email me with any questions about the technical indicators as we begin 2013.

From the headline, you can see that the NYSE Bullish Percent did reverse back into a column of X’s or offense on December 19.  This was a rather short time to have the defensive team on the field–November 9 to December 19.  Each time is different so we don’t predict how long or why.  The only indicator in a column of O’s at this time is the OTC Bullish Percent.

Another development is the relative strength that is being exhibited in the International Equities asset class.  This asset class was in last place as we started 2012.  In March it moved to the number 4 spot ahead of Cash.  As of yesterday it replaced Currency in the number 3 spot  This suggests increasing exposure to the International Equity asset class.  Both the Emerging Markets ETF (EEM) and the Europe Asia and Far East ETF (EFA) have reversed into a column of X’s on their relative strength charts.

I have commented recently about the seasonality of stock buying in December.  The old January effect starts in December.  We also see year end tax selling which provides trading opportunities in washout stocks.  You have to be nimble to play that game but it can also be rewarding short term.

Here are the indicators this week:

NYSE BULLISH PERCENT:  The main coach is back suggesting offense.  The NYSE BP reversed back into a column of X’s on December 19.  Does this mean clear sailing going forward?  I don’t know, but it does suggest that demand for stocks is continuing to increase.  This indicator is at 60.24%–offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  A quick climb from below 30% on November 19.  The current reading is at 69.43%–offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks in still in a column of O’s and defense.  The current reading is 46.11% with a reversal occurring at 48%–Defense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator for OTC stocks is on offense at a level of 59.09%–offense.

SECTOR DISTRIBUTION CHART:  Click Image

You can see we had a couple more sectors reversing up, Computers and Building.  We have a total of 22 sectors back in a column of X’s.  On November 28th there were only 2 sectors still in a column of X’s–Banks and Saving & Loans. The average risk is at 51.59%, not a high risk level.

DOW JONES CORPORATE BOND INDEX:  This chart remains in a column of X’s on the long term chart but it is also close to reversing to a column of O’s.  We are .18% away from a reversal.  The short term chart is in a column of O’s and on a sell signal.  We remain above the longer term trend chart but this might be the “shot across the bow” to review bond positions and take any defensive strategies that might be appropriate.  I am hoping to get some additional thoughts on “why” this is happening now and will share them as I develop them.

RELATIVE STRENGTH:  We continue with Domestic Equities in the #1 spot followed by Fixed Income, International Equity, Foreign Currency, Cash and Commodity.

There seems to be a lot of noise in the markets right now.  I am expecting a lot of sector rotation as we move to the end of the year.  If you want thoughts on how to position for 2013 give me a call.  Have a blessed Christmas.

One area of the market that is really starting to show momentum is non US stocks.  The Fed’s decision to print $85 billion a month and buy long US Government bonds has put the US dollar in a tail spin versus other currencies.  We are also starting to see some sell signals given in the Exchange Traded Funds (ETFs) that invest in bonds.  This is something to pay attention to and may be related to the weaker US dollar.  I will have more comments on Thursday.

Here is a look at the Sector Distribution Chart.  As the demand continues to build for equities we are seeing more sectors reverse back to a column of X’s. The average risk is back above 51% at this time.

Let me know if you have any questions–drop me an email or call 701-280-5031.

Nobody can definitively answer the question of why so I accept it as demand and “what is–is.”  We have made nice progress with the short term charts and we have seen the S&P 500 Bullish Percent chart reverse back to offense but we have not yet seen the Main Coaches, the NYSE and OTC Bullish Percents garnered get enough new buy signals to get a reversal.

Attached is a chart of the S&P 500 $20 Box chart.  You will notice since the low set last October, that this chart has made a series of higher highs and higher lows.  The reversal back to column of X’s occurred on December 5. It would appear from this chart we will likely test the previous high set in September.

I am attaching another chart showing the Bullish Percent Chart for the S&P 500 (SPX).  This reversal back to a column of X’s occurred on December 11.  To get 6% of the NYSE stocks to change from point and figure sell signals to buy signals takes demand.  We are seeing that now.

Here are the technical indicators this week.

NYSE BULLISH PERCENT:  The main coach for NYSE stocks remains on defense but continues to make progress toward a reversal.  The current reading is 58.18% and the reversal to X’s occurs at 60%.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator remains on offense at a level of 61.39%.  This have moved from 22% in November.  So sign of a change at this time.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains in a column of O’s at a level of 44.97% with a reversal occurring at 48%.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator remains in a column of X’s at a level of 49.21%.

SECTOR DISTRIBUTION CHART:  Click image

We had two more sectors reverse up this week.  They are Medical and Business Products.  The average risk is 49.59% so not a high risk market.

DOW JONES CORPORATE BOND INDEX:  The Fed has a new plan for dealing with the easing they have done.  They will back off the easing once the unemployment rate drops below 6.50%.  Here is the headline from Forbes.: QE4 Is Here: Bernanke Delivers $85B-A-Month Until Unemployment Falls Below 6.5%.  The Dow Jones Corporate Bond Index is unchanged from last week.

RELATIVE STRENGTH:  No changes in these rankings.  The are Domestic Equities, Fixed Income, Foreign Currency, International Equity, Cash and Commodity.

Let me know if you have any questions.  I have a busy weekend.  Our daughter Allie is getting married on Saturday so I am taking Friday off to help keep everybody calm.  We are excited for her but wish she was not moving to Minneapolis.

We continue to see the technical indicators improving over the past few weeks. So far we have the short term indicators (NYSE and OTC Ten Week Indicators) in a column of X’s. We have the High Low Indicators in a column of X’s as well.

On Tuesday December 11, we had the Bullish Percent Chart reverse back to a column of X’s for the S&P 500. Since this indicator only follows 500 stocks, it tends to move quicker than the longer term NYSE and OTC Bullish Percent charts. This is another positive suggesting further demand for stocks.

Here is a look at the Sector Distribution Chart. We are seeing more sectors reverse back to a column of X’s.

It is encouraging to see the Semiconductor Sector reverse back to a column of X’s. From past experience, it is difficult to get a meaningful stock market advance without the semiconductor sector participating.

The Fiscal Cliff noise is getting more deafening. Hopefully we can find a satisfactory fix so both political parties can win which will result in the citizens losing.  According to the Wall Street Journal, the real deadline is Friday December 21 which is the date Congress is expected to adjourn for the year.  Rules in the House of Representatives require that lawmakers have three days to review a major piece of legislation before they vote.  My guess is there will be a way around that law as well but if they follow the law, the legislation needs to be introduced by December 18 if the lawmakers want to get this wrapped up before leaving town for Christmas.

It appears the Federal Reserve is pumping money into the economy again.  This is in anticipation of slowing economic growth in 2013 which is the likely result of higher taxes or less government spending.

Give me a call with any questions.  I will give a full update tomorrow.

The NYSE Ten Week Indicator, which is a short term indicator, peaked on September 14 at a level of 82.16%.  It subsequently reversed down and declined to a level of 20.91% on September 15.  Anytime this indicator gets below 30% we want to pay attention to reversals back to “bull alert status” as this indicator breaks above 30%.  That happened on November 19.  Since that time we have generally had rising equity prices.  We have also seen the Dow Jones Industrial Average (DJIA) give it’s first point and figure buy signal at about the same level it gave a major triple bottom sell signal which was at 13,050.

I found the attached chart to be interesting in light of the technical indicators I follow.  This was produced by Global Macro Monitor.  It shows some of the volatility of the S&P 500 this year.  What I found interesting is how close this follows our indicators.  Now the indicators I use are not “market timing tools”, rather they are “risk management tools”.  They show the S&P 500correction started on April 3.  We had our short term NYSE 10 Week Indicator reverse down of March 28 on 3/28/12 and the NYSE BP reversed down on April 10.  They indicate the S&P 500 correction ended on June 4.  It was on June 8 when the NYSE 10 Week Indicator reversed back to offense and the NYSE BP reversed up on July 3.

The next correction started on September 14.  On September 25, the NYSE 10 Week Indicator went to defense and the NYSE BP followed to defense on November 9.  This chart shows the S&P 500 began a new rally on November 16 and the NYSE Ten Week indicator reversed back to offense on November 19.

Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach is still on defense.  This is a slower moving indicator and it takes a certain amount of back and forth action in stocks prices to establish new buy signals.  We have 56.63% of the NYSE stocks on buy signals and it will take a move to 60% to reverse back to offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator remains on offense and it have moved to a risk level of 52.94%.

OTC BULLISH PERCENT:  The short term indicator for OTC stocks remains on defense as well.  This has a risk level of 43.61% and we need to get to 50% to see a reversal to offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is also on offense at a level of 44.10%.  Offense.

SECTOR DISTRIBUTION CHART:  Click image

We continue to see improvement in this chart.  The average risk 48.08%.  We have seen a few more sectors move back to offense including Retail and Chemicals.  We now have 10 sectors on offense and a column of X’s.

DOW JONES CORPORATE BOND INDEX:  This chart is unchanged from last week.  The longer term chart remains in a column of X’s.  The short term chart is now in a column of O’s so we may see some selling pressure on corporate bonds.  This week Bloomberg reported that  the yields on speculative-grage corporate debt in the U.S. dropped to the lowest levels on record.  One reason for this demand in corporate bonds is the the 10 year treasury has a current yield of 1.60% which is 40 basis points below the yield on the S&P 500 (SPY).

RELATIVE STRENGTH:  Even though the S&P 500 peaked on September 14 at 1,474, the Relative Strength of US Equities has continued to hold it’s leadership position and we have actually see the relative strength of US Equities increase since that time.  Second place is held by Fixed Income.  The remaining asset classes, in order of relative strength are Foreign Currency, International Equity, Cash and in last place Commodity.

Let me know if you have questions.

We have been having problems with the email notifications when I make technical comments.  We believe this has been resolved so you can get timely updates.  We have seen our short term indicators move back into a column of X’s from oversold levels.  The High Low charts for both NYSE and OTC stocks are also in a column of X’s.  The longer term NYSE and OTC Bullish Percents have improved but not enough to make a reversal.  We have also seen the Nasdaq non financial Bullish Percent move back to a column of X’s.  These are all signs of demand from oversold levels.  I liked the action on the Dow Jones Industrial Average yesterday when it initially sold off resulting in a reversal down but then did an intra day reversal back to a column of X’s.  The Dow needs to break through 13,000 to confirm a new uptrend.  Until that happens we will be in a trading range from 13,000 to 12,500, the recent low.  I have attached a chart showing these ranges.  Click to enlarge.

Here are the technical indicators this week.

NYSE BULLISH PERCENT:  The main coach for NYSE stocks remains in a column of O’s this week and on defense.  This hit a low of 53.59% and now resides at 55.61%.  We will need to 6% of the NYSE stocks move from sell signals to buy signals to reverse this back to offense.

NYSE % ABOVE 10  WEEK MOVING AVERAGE:  This short term indicator hit a low of 20.91% bullish on November 15 and reversed back to bull alert on November 19.  This indicator has moved to a level of 48.21% and it is in a column of X’s.

OTC BULLISH PERCENT:  The main coach for OTC stocks also remains on defense.  We currently have 42.47% of the OTC stocks on buy signals.  Defense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator (like the NYSE 10 Week) is in a column of X’s and on offense.  The current risk level is 40.09%.  Offense.

SECTOR DISTRIBUTION CHART:  click image

We have had only one sector reverse back to offense and that was Textiles.  That leaves us with 36 sectors in a column of O’s and 4 sectors in a column of X’s.  The average risk is 46.96%.  We will watch for reversals in the over sold sectors to see if demand returns.

DOW JONES BOND INDEX:  The long term chart remains in a column of X’s.  The short term chart recently reversed into a column of O’s showing some sellers of corporate bonds.  We will have to watch for further developments to determine if there is a change in trend.

RELATIVE STRENGTH:  These longer term charts remain in the same order as we have been in for sometime.  Each asset class passes the Cash Bogey check and the current order is:  Domestic Stocks, Fixed Income, Foreign Currency, International Equity, Cash and Commodity.

My daughter Siri plays for the UND women’s basketball team.  They will be playing NDSU in Fargo on Friday evening.  I believe it has been 7 years since they played each other.  It will be fun to see the rivalry back in action.  Let me know if you have any questions on the indicators.

I will do a full report on Friday this week.  Enjoy your Thanksgiving time with family and friends.

I have included some past dates to give you a perspective on where this chart has been.  These sell offs can create opportunities for investors to take advantage of better stock prices.

The short term indicators I follow (Ten Week Indicators for NYSE and OTC stocks) are at 20.91% and 23.59% respectively.  Now we wait to see when Wall Street will have an appetite for risk.

Have a good weekend and call or email me with any questions.

The last time we experienced one of these sell offs was between August 2, 2011 and October 10, 2011.  In July 2011 we had 68% of the NYSE stocks trading above their 50 day moving average.  By October we only had 12% of the NYSE stock trading above their 50 day moving average.  Getting below 30% is the start to trying to find a bottom.  We are there now. 

So what caused this sell off?  The election results? The pending Fiscal Cliff?  The slowing US economy?  Probably all three.  If nothing gets accomplished in Washington, the impact of falling off the Fiscal Cliff would be a hit of 4% of our gross domestic production (GDP).  That is a big impact on an already slow economy.  Falling off the Fiscal Cliff would force a reduction in spending of $136 billion or .8% of GDP.  The automatic tax increases would be $532 billion or 3.1% of GDP.  Do you think a compromise can be reached? 

Here are the results of our technical indicators this week:

NYSE BULLISH PERCENT:  You know we are on defense and we saw this indicator decline to a level of 56.15%. 

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator has now declined to a level of 23.65% so we are in the “green light” area where we may start to find some traction.  I don’t know how low this can go, but I know that buying at these risk levels is usually better than buying at the risk levels of 80% like we were in September.  Defense.

OTC BULLISH PERCENT:  The main coach for OTC stocks is on defense.  The current risk level is 42.96%. 

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator for OTC stocks is on defense and it too has fallen below 30% to a level of 25.17%.  Defense.

SECTOR DISTRIBUTION CHART: (Click Image)

As you can see, we slipped further to the left.  The average risk has declined to a level of 47.11%.  We had Insurance, Forest & Paper and Real Estate decline this week.  We now have 10 sectors hanging onto a column of X’s and 30 sectors on defense.  Those sectors at 30% and lower are ones to watch for early break outs as bottom fishing investors start stepping back in for a quick gain. 

DOW JONES CORPORATE BOND INDEX:  Same story, different day.  Demand in control of corporate bond prices.  Treasury yields continue to decline in a rush to de-risk so corporate yields, relative to treasuries, are attractive. 

RELATIVE STRENGTH:  This longer term indicator continues to have Domestic Equities in the number one spot.  Following Domestic Equities we have Fixed Income, Foreign Currency, International Equity, Cash and Commodity.  We will watch these asset classes for any further changes that show longer term changes coming.

Let me know what questions you might have.  Drop me an email or give me a call.  I will try not to talk about “fiscal cliff” or use the words “kick the can down the road” in the future. 

Here is a look at the Sector Distribution Chart.  You can see we have several additional sectors reversing down showing supply or sellers.  (Click image)  We now have 25 sectors in a column of O’s and 15 in a column of X’s. 

I have discussed in the past how the NYSE Bullish Percent (our main coach) is not a good timing tool.  The Dow Jones Industrial Average (DJIA) has given 3 point and figure sell signals and the NYSE BP is just now reversing down.  The NYSE BP is a risk management tool and I have been discussing the increasing risk for several weeks.  When will we get demand back into the stock market?  Our short term indicators are approaching the oversold levels so that is encouraging for a possible shift in demand.  At this point I am still more concerned about capital preservation than capital appreciation. 

The bond market is closed today in observance of Veteran’s Day.  Thanks to all the veterans and active military who are reading this.  Email or call me with any questions.

On the short term charts, the Ten Week Indicators declined leaving the NYSE 10 Week at a level of 36.16% and the OTC 10 Week at a level of 32.15%.  These indicators typically get below 30% before we start seeing traction and demand.  When the risk gets low enough you will see Wall Streets appetite for stocks return.

Have a good weekend and be sure to call if you have questions.

With the election over we have solved two “unknowns”:  Who will be elected president and how will the markets react to an Obama re-election?  We got both answers on Wednesday.  With the pullback on Wednesday, we wiped out all of November’s gains plus some.  Logic would suggest we will see more volatility as the financial markets react the these previous unknowns.

Wednesday was a good day for healthcare providers and many home builders.  The most visible losers were large financials and energy related securities, especially coal stocks.  Since 1952 we have had 4 election years where the combined months of November and December resulted in losses.  Those years were 1964, 1988, 2000 and 2008.  We will have to wait until December 2012 to see how this year plays out.  

Here is what we know from our indicators.  The NYSE Bullish Percent is still of offense.  We have not yet had enough net new stocks give point and figure sell signals to reverse from the high of 66% set in September to the reversal level of 60%.  On Wednesday, we finished the day at 62.23%.  We certainly have seen many stocks give sell signals as evidenced by the Ten Week Indicators.  In September, 82% of the NYSE stocks were trading above their 50 day moving average.  This has declined to 41.23%.  The CBOE Volatility Index (VIX) also broke a double top at $17 on October 19 suggesting that volatility was increasing.  The VIX closed at 19.08 on November 7. 

I have attached charts for the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX). 

From the Dow chart, you can see we have broken the bullish trend line which held 13,050 three times before breaking through on Wednesday.  This was the third sell signal for the DJIA

The SPX has given 2 sell signals and it currently is holding the long term trend line at 1390.  A break below 1390 would be a bearish signal for the SPX.

The NYSE Bullish Percent is still on offense but the major indexes are giving sell signals.  This is the result of a smaller number of stocks being followed in the indexes (30 stocks in Dow and 500 in SPX) so we get faster chart action  Here are the results for this past week.

NYSE BULLISH PERCENT:  The main coach remains on offense but we have seen some slippage.  The current reading 62.33% with a reversal occurring at 60%.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator broke another double bottom this week leaving us at current level of 41.23%.  Should this get to the 30% or below level it starts to create some opportunities.

OTC BULLISH PERCENT:  The main coach for OTC stocks is holding on to offense as well.  The reading is 46.73% and defense occurs at 46% so getting close.  Caution.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator has declined to a level of 36.64%.  This peaked at 70% in September.  Caution.

SECTOR DISTRIBUTION CHART:  Click image

As you would expect, the majority of the activity was lower.  We had 7 sectors reverse down.  We now have less than half of the sectors in a column of X’s as we have 22 sectors out of 40 in a column of O’s.  The average risk is 52.31%.  Caution is recommended. 

DOW JONES CORPORATE BOND INDEX:  We have had this chart on buy signals for quite a while.  This is logical because as interest rates on government bonds declined there was more demand for corporate bonds.  Both the short term and long term charts are in a column of X’s and on buy signals.

RELATIVE STRENGTH:  No change in our Relative Strength rankings again this week.  We have seen equity prices decline but, relative to other asset classes, they remain number one followed by Fixed Income, Foreign Currency, International Equity, Cash and Commodity.  This is a longer term look as we have had Domestic Equities in the number one spot since October 2011 (over a year).  Stay tuned for any future changes.

Good luck to the ND deer hunters this weekend.  I hope to get out on Sunday for a few hours to fill my doe tag.  Call or email me any questions.

There are lots of cross currents in the market right now.  The short term indicators continue in a column of O’s while the main coaches remains on offense.  Logic suggests a some what more defensive position with the flexibility to respond should we see demand picking up again in the short term indicators.   Here is an overall view of several indicators:

 In a column of X’s:  NYSE Bullish Percent and OTC Bullish Percent

 In a column of O’s:  Optional Bullish Percent, S&P 500 Bullish Percent, Nasdaq (non financial) Bullish Percent,  NYSE 10 Week and High Low Indicators, OTC 10 Week Indicator and High Low

 Since reaching a high on September 14th, the S&P 500 has declined 3.65% and the Volatility Index (VIX) has moved from a level of 14 to 18.50.  Caution is suggested.

In recent weeks we have discussed the fact that the stock market “risk” is rising.  I can’t predict accurately how that might play out for the major indexes or for individual stocks.  There are a variety of ways to manage the risk but there is no one strategy that will work for all investors.  If you want to discuss specific strategies give me a call.  The S&P 500 Bullish Percent did reverse down this week.  We now have 70.48% of the S&P 500 stocks on buy signals.  This is a “faster moving” indicator as it tracks just 500 stocks.  This reflects the increasing risk.   

Here are the indicators this week:

NYSE BULLISH PERCENT:  The main coach for NYSE stocks remains on offense.  We have seen some slippage in the percent of stocks on buy signals but not enough to cause this indicator to reverse to defense.  That would happen at a rate of 60% bullish and we are now at a level of 64.31% and still on offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator saw some additional selling pressure this week.  This moved lower to a current risk level of 43.39%.  This is our lowest level since reversing to bull alert in June.  Caution recommended.

OTC BULLISH PERCENT:  The main coach for OTC stocks also continues to be in a column of X’s.  From the September high of 52.06%, we have declined to the current level of 48.50%. 

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator has declined to 40.95% after hitting 70% in September.  Like the NYSE Ten Week Indicator, this is suggesting defense and caution.

SECTOR DISTRIBUTION CHART:  Click Image

You will notice we have a few more sectors reversing down.  These sector charts are showing the percent of stocks with in each sector on point and figure buy signals.  For example, 30% of the Semiconductor Stocks are on buy signals so that means 70% are on sell signals.  That does not suggest much demand.  On the other hand, 74% of the Wall Street stocks are on buy signals which 26% must be on sell signals.  This is not a “low risk” sector.  The 74% level does not mean this sector has to decline but it helps me visualize the risk of the different sectors.  We have an average risk this week of 54.12% with 13 sectors now in a column of O’s.

DOW JONES CORPORATE BOND INDEX:  Same as last week.  Demand in control of corporate bonds.

RELATIVE STRENGTH:  The order of the asset class relative strength is also the same as last week.  That order is Domestic Equities, Fixed Income. Foreign Currency, International Equity, Cash and in last place, Commodity. 

We had trouble with the our email service last week.  I published these technical comments but there was not an email notification.  We believe we have that corrected.  Please call or email with any questions. 

One of the more prominent misses was Google (GOOG).  This stock had a rough day on Thursday.  Below is the Wednesday chart.  We can see from this chart that GOOG had given two point and figure sell signals, one at the double bottom break at $748 and again at the double bottom break at $736.  I wonder if somebody knew something?

Below is the chart as of Thursday October 18.  The third sell signal was given and this brought a lot of selling pressure.  Maybe we will get a “dead cat bounce” from this level.  A lot of analysts missed this one.

Here are the technical indicators this week. There has been some improvement in the short term indicators. 

NYSE BULLISH PERCENT:  The main coach is still on offense and running plays.  We have 66.40% of the NYSE stocks on buy signals.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This past week, on October 16, we had this short term indicator move back into a column of X’s.  It resides at 67.03% but remains on a sell signal.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains in a column of O’s as well.  We currently has 50.69% of the OTC stocks on buy signals so just over half of the OTC stocks are on buy signals. 

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is still in a column of O’s and on a sell signal so short term still defensive.

SECTOR DISTRIBUTION CHART:  Click Image

We had 5 move sectors move down this week but we did see Wall Street and Aerospace move higher.  We now have 7 sectors in a column of O’s with an average risk of 56.35%.

DOW JONES CORPORATE BOND INDEX:  These charts are unchanged both short term and long term.  Demand is clearly in control of bond prices (demand for bonds means higher prices, lower rates).

RELATIVE STRENGTH:  Nothing new here.  The ranking remains the same.  The relative strength in order is:  Domestic Equity, Fixed Income, Foreign Currency, International Equity, and Cash and Commodity. 

ANATOMY OF A COLLAPSE:  Here is one more chart to look at.  This is (was) a that company received $249 million in federal funds.  It is (was) involved in green energy.  In January 2010, the stock broke through the uptrend line and has traded in a negative fashion since that time.  It was in February 2012, in the $2.00 range, where the few remaining analysts gave up on the stock. 

Follow the Fed but don’t invest like them.  Call or email me with any questions.

I have learned over the years that making these decisions when the yellow light is flashing is more beneficial than thinking about them when the red lights are flashing.  I bring this up because we are seeing a bit more damage being done to the indicators.  As this point the “Main Coaches” are still suggesting offense.  The Dow Jones Industrial Average has broken a double bottom at the 13,350 level on a 50 box chart.  This is the first Dow sell signal since the new advance that started in June and was confirmed by the NYSE Bullish Percent reversing to offense on July 3.  We often times find the first sell signal is a false signal but we won’t know if that is the case this time until we get more trading action.  The S&P 500 has set a double bottom at 1435.  We will see what the next few days bring.  The longer term picture remains positive at this point.  Here are the indicators.

NYSE BULLISH PERCENT:  The main coach is still suggesting offense.  The current risk level is 65.62%, off the high of 67.38%.  It would take a move to a level of 60% to get a reversal down.  Offense for now.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator has declined again.  It has moved to a level of 57.88% and it is on defense suggesting caution short term.

OTC BULLISH PERCENT:  The main coach for OTC stocks is on offense at a risk level of 50.92%.  We had been at 52.06% so not a big change at this point.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator remains in a column of O’s at 53.12%.  Caution.

SECTOR DISTRIBUTION CHART:  Click image

We now have 3 sectors that have reversed down.  They include Semiconductors, Restaurants, and Textiles.  The other 37 sectors remain in a column of X’s.  It will be important to watch for sector rotation as Wall Street moves into the final quarter of 2012.  Those sectors above 70% and reversing down will be ones to protect profits on. 

DOW JONES CORPORATE BOND INDEX:  Both long term and short term charts are in a column of X’s suggesting higher bond prices, lower interest rates on corporate bonds. 

RELATIVE STRENGTH:  The rankings are unchanged with the following order:  Domestic Equities, Fixed Income, Foreign Currency, International Equity, Cash and finally, Commodity in last place. 

Call or email with thoughts or questions.

From a market low of 1270 set in June the chart for the S&P 500 reversed up and gave a double top buy signal at 1330.  On July 3 the Main Coach reversed to offense and this index broke through the bearish resistance line at 1350.  The price action continued to move to higher highs and higher lows until the big break out in September at 1415.  We hit a high of 1470 on September 14.  On September 25 the NYSE 10 Week Indicator reversed down suggesting “caution”.  The SPX chart then broke a double bottom at 1445.  We now have support at 1435 and resistance at 1455.  A move below 1435 suggests the next support at 1400.  A move to 1460 would be a bearish signal reversal pattern–a bullish chart pattern.  Time will tell how this plays out.  No sense in me predicting–what do you think?  Either way, having a plan is helpful.

Here is a chart that is helpful to see where we have been.  Take a look at the PE ratios, dividend yield and 10 Year Treasury Yield from March 2000, October 2007 and September 2012.  This is an encouraging chart.

Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach remains on offense.  We are at 66.04% bullish and in a column of X’s.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator continues in a column of O’s this week.  The current risk level is at 64.04%.  A break below 62% would be a double bottom sell signal.  While in a column of O’s we suggest caution.

OTC BULLISH PERCENT:  The  main coach for OTC stocks remains on offense at a level of 51.68%.  No sign of a down turn at this time.

OTC % ABOVE 10 WEEK MOVING AVERAGE: This short term indicator for OTC stocks is at 61.69%.  This is also in a column of O’s so caution short term.

SECTOR DISTRIBUTION CHART:  click image

We continue with a bulk of the sectors above 50%.  The average risk is 56.79%.  We normally get into the 60% plus range.  We hit an average of 63.73% on March 19 of this year and then went to defense for the NYSE BP on April 10. 

DOW JONES CORPORATE BOND INDEX:  The long term Dow Jones Corporate Bond Index chart broke a double top in October so no sign of a down turn in corporate bond prices at this time (remember, the fed is driving these rates–don’t fight the fed).

RELATIVE STRENGTH:  No change in ranking.  The order for the relative strength asset classes are Domestic Equity, Fixed Income Foreign Currency, International Equity, Cash and Commodity.  This has been the same ranking for some time.  Domestic Equity has been in the #1 spot since October 24, 2011 so we are coming up on one year. 

Give me a call with any questions on the technical indicators or to discuss strategies for moving forward.

The S&P 500 has gained 13 out of 15 times for the final months during a presidential election year since 1950, regardless of which political party wins. This year can certainly be different, but unless you’re a hardcore contrarian, you probably shouldn’t bet against history.

Here is a run down of the indicators.

NYSE BULLISH PERCENT:  Offense, no sign of a turn at this point.  We have 66.14% of the NYSE stocks on buy signals.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  From the comment yesterday you know this indicator has reversed down below 70%.  It now resides at a level of 64.45%.  We had 82% of the NYSE stocks trading above their 50 day moving average and now we are seeing more NYSE stocks sell off.  Defense.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on offense.  It has a current risk level of 51.53%. 

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is in a column of O’s and has declined to a level of 61.12%.  This is suggesting short term caution.

SECTOR DISTRIBUTION CHART:  Click image

We continue to work our way to the right side.  We had one sector reverse down from last week and the was the Textiles sector.  The average risk has moved to 56.70%.  Those sectors above 70% represent greater risk so reversals down from those levels would be reason for concern.

DOW JONES CORPORATE BOND INDEX:  The trend remains in place.  The longer term chart reversed back into a column of X’s this week.  For now the trend of lower interest rates and higher bond prices prevails.

RELATIVE STRENGTH:  We have seen the same relative strength trends remain in place. In the number one position is Domestic Equities.  In the number two spot is Fixed Income.  The balance of the asset classes, based on relative strength are Foreign Currency, International Equity, Cash and in last place Commodity. 

Call or email me any questions.

The longer indicators, the NYSE Bullish Percent is still at 67.01% and the S&P 500 Bullish Percent is at 77.96%.  They are still of offense.  If you have sell stop orders in place you are likely to have them filled.  After this consolidation we are likely to see buyers return as we move into the fourth quarter but we will have to see how that plays out.

We had one sector reverse down and that was Textiles.  The other 39 sectors are still in a column of X’s.

Here is a look at the trading chart for the S&P 500 (SPX) where the double bottom is broke giving a sell signal, the first one in the new uptrend that started in July when the offensive team came back on the field.  The first sell signal is often times a false signal.  Time will tell.

Let me know if you have any questions.

Anybody that buys individual stocks will occasionally find that all purchases don’t work out as planned.  If this has happened to you, this chart may help you feel better knowing that other folks, who presumably are much smarter, have also made poor decisions.  How would you like to be down $27 billion?  

Here are the indicators this week. 

NYSE BULLISH PERCENT:  The main coach for NYSE stocks remains on offense.  We have moved higher on the chart.  We are now at 67.53% bullish.  We started this advance on July 3 with a reversal to a level of 50% bullish.  The higher we go, the greater the risk we will be accepting, but offense for now.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator hit 82% bullish and now resides at a level of 79.17%, still in a column of X’s.  We are in high risk territory but we can also remain extended for long periods of time.  This bears watching more closely at this level. 

OTC BULLISH PERCENT:  The main coach for OTC stocks remains in a column of X’s as well.  The current risk level is 51.42% bullish.  Slightly over half of the OTC stocks are on buy signals.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator has a risk level of 70.39%.  We remain on a buy signal but like the NYSE 10 Week Indicator, we are extended short term.

SECTOR DISTRIBUTION CHART:  Click Image

Another active week for the sector bullish percent charts.  There were 29 charts that changed over the past week.  We now have 40 of the 40 sectors in a column of X’s.  The average risk has increased to a level of 57.23%.  Several sectors have reached the 70% plus range so we watch for reversals down from these level to become more defensive.

DOW JONES CORPORATE BOND INDEX:  This chart is showing demand for corporate bonds.  The short term chart has once again reversed into a column of O’s but it remains on a buy signal.  This chart will help guide us as we see changes in demand for bonds.

RELATIVE STRENGTH:  The order of ranking has stayed pretty steady.  We lead with Domestic Equities followed by Fixed Income, Foreign Currency, International Equity, Cash and Commodity in last place.  This ranking shows where the best relative strength is being exhibited.  If you could only buy 2 asset classes, choose the two highest ranked–Domestic Equity and Fixed Income. 

Let me know if you have any questions on these indicators.

We continue to see the technical indicators moving higher.  Of course, the higher the technical indicators go the greater the risk.  One of the hardest things to do when you use technical charts is to listen to the charts and to turn off the outside news/noise.  I can put together a long list of reasons why the stock market should not be going up.  What I have to accept is that it is going up and the reason it is going up is there are more people willing to buy than sell stocks.  The reason they are willing to buy is not relevant.  Many experts assume this advance is fueled by the Fed’s monetary policy.  What is–is.

We are at resistance levels for the major indexes.  We go up two days and then down one.  This is a good time to start thinking a couple of moves ahead in this “risk” game.  Should sell stop orders be set?  Should some money be taken off the table?  Should covered calls be sold on stocks?  There is no universal answer to these questions.  They are dependent on each individual’s situation.  I am available to help you consider what might be appropriate for you.  Give me a call. 

Here are the technical indicators for this week.

NYSE BULLISH: The Main Coach remains on offense.  We are at 63.62% bullish.  There is no sign of a reversal at this time.  Offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is back in a column of X’s and it remains on a buy signal at a level of 74.51%.  This is the highest level we have been since February when we topped out at 88% bullish.  Offense.

OTC BULLISH PERCENT:  The Main Coach for OTC also remains on offense.  The current risk level is 48.91% bullish. 

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator moved back into a column of X’s and gave another buy signal. The current risk level is 64.76%.  Offense.

SECTOR DISTRIBUTION CHART:  Click Image

We had 24 sectors move higher this week.  Only 5 sectors still in a column of O’s so demand continues in control.  This is an interesting way to look at risk.  On August 1 the Precious Metals sector was the lowest risk sector at a risk level of 12% bullish.  On August 7 we had this sector reverse up to “bull alert” status.  We now have 43% of the Precious Metals stocks on buy signals.  This sector changed to “favored” on September 5.  If you watched the gold market the past couple of weeks you would understand how this has become a favored sector.

DOW JONES CORPORATE BOND INDEX:  Same story as last week.  Demand in control of bonds.  This is reflected in the strong relative strength reading for the past several months.

RELATIVE STRENGTH:  The relative strength ranking’s remains the same and they are:  Domestic Equity, Fixed Income, Foreign Currency, International Equity, Cash, and Commodities.  Each of these asset classes now beats the “Cash Bogey”.  This puts more credence to the strength we are seeing, especially for the top two asset classes, Domestic Equities and Fixed Income. These two asset classes should be over weighted.

Call or email any questions. 

Last year at this time we had the defensive team on the field and the markets were declining.  This year we have the offensive team on the field so the bias would be for higher prices.  As we move toward the election in November the “noise” will get deafening so let’s watch the technical indicators for any changes.

NYSE BULLISH PERCENT:  The main coach is on offense at a level of 60.23%.  Not much more to add.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is in a column of O’s but still on a buy signal.  We have 63.92% of the NYSE stocks trading above their 50 day moving average.  Should this continue to weaken it would suggest a more cautious strategy.  For now, still on offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on offense as well.  We have 46.84% of the OTC stocks on buy signals.  No sign of a turn down.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator, like the NYSE High Low, is in a column of O’s but on a buy signal.  We have 55.73% of the OTC stocks trading above their 50 day moving average. 

SECTOR DISTRIBUTION CHART (click image)

Not a lot of changes this past week.  We have an average risk of 50.91%.  The “favored” sectors in green are the strongest groups. 

DOW JONES CORPORATE BOND INDEX:  This chart remains unchanged.  We have the long term chart on a buy signal but in a column of O’s.  The short term chart is in a column of X’s and on a buy signal. 

RELATIVE STRENGTH:  The top two sectors remain Domestic Equity and Fixed Income.  They are followed by Foreign Currency, International Equity, Cash and Commodity.  There are no asset classes close to changing rank at this time.

Let me know if you have any questions on this indicators.  You can email or call me.

TWO WORKERS FOR EVERY SOCIAL SECURITY RECIPIENT

As of 2012-06 the civilian labor force was 155,163,000.

As of 2012-06 there were 111,145,000 in the private workforce.

As of 2012-06 there were 56,174,538 collecting some form of SS or disability benefit.

The ratio of SS beneficiaries to private employees has thus passed the 50% mark (50.54%).

There are now half as many people getting some kind of Social Security benefit as there are workers in private employment paying into Social Security. And the trend is clearly advancing. This cannot be sustained.  We read that one in eight families is now getting food stamps and that over 50% of US families get some form of government check each month, while the percentage of workers in the private workforce is shrinking. 

What this likely means is Boomers will not be able to retire in the traditional sense.  We will keep working and those coming behind us will not have our jobs like other generations have experienced.  Here is a chart that shows the employment of those 55 and older.  Click Image

The Blue Line is the employment level of those 55 and older (scale on left side) and the red line is Civilian Employment (scale on right side).  We lost 8 million jobs during the Great Recession and we are still down by 4 million and the Boomers are taking market share of the younger workers.  I would imagine there are fewer Boomers retiring because trying to produce income when the 10 year treasury is yielding 1.68% is difficult.  Boomers should work on maintaining their health and find something you love doing–we will likely be doing it a lot longer then we had anticipated.

Here are the technical indicators this week.  Not a lot of changes this past week.  It seems like we are just drifting along.  Maybe after Labor Day the markets will wake up. 

NYSE BULLISH PERCENT:  The main coach remains in a column of X’s and on offense.  The current risk level is 60.06%.  No sign of a change in direction at this time.

NYSE % ABOVE 10 WEEK INDICATOR:  This short term indicator did reverse in to a column of O’s however it remains on a buy signal at a level of 66.73%.  We will have to see what the next week brings.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on offense at a risk level of 46.92%.  Like the NYSE, no sign of a turn at this time.

OTC % ABOVE 10 WEEK INDICATOR:  This short term chart remains in a column of X’s and on a buy signal.  The current risk level is 59.15% so not yet in the high risk area.

SECTOR DISTRIBUTION CHART (Click Image)

Most of the activity was to the upside this week.  We had 8 sectors move higher and 3 moved lower.  There are 31 sectors in a column of X’s and demand.  We did see the Steel Sector reversed back to defense this week.  This is a good visual way to “see” the risk for each sector.

DOW JONES CORPORATE BOND INDEX:  This past week we had the short term Dow Jones Corporate Bond Index chart move back into a column of X’s.  The longer term chart is still in a column of O’s but on a buy signal.  The reversal in the short term chart suggests that bond prices will rise (lower rates). 

RELATIVE STRENGTH:  We continue with the same order of Relative Strength.  They are as follows:  Domestic Equity, Fixed Income, Foreign Currency, International Equity, Cash and in last place, Commodity.  One way you can use this information is to consider over weighting the first two Relative Strength asset classes.  When the relative strength changes you adjust your allocation.  On March 16, 2011, International Equity was replaced by Commodity.  International Equity has not made it back into the top two places since that time and the performance has lagged.  Domestic Equity has been in the top two positions since October 2011 and the performance reflects this relative strength.

Enjoy your Labor Day weekend.  Call or email me any questions.

Here is a recent quote from an expert:  CNBC– S&P 500 Facing 25% Drop Before US Election: Janjuah The S&P 500 is likely to fall by 20-25 percent over the next three months according to Nomura strategist Bob Janjuah. In a research note published on Tuesday, the long-term bear who called the recent rally for U.S. stocks said he expects investors to be back in risk-off mode until the U.S. election is over. “I now think the correct thing to do — as I also said in April and June — is to prepare for a serious risk-off phase between August and November.  Over the August to November period, I am looking for the S&P 500 [SPX 1413.17] to trade down by 20 to 25 percent…to trade at or below the lows of 2011.” Janjuah expects the dollar to be a big beneficiary if the S&P 500 does fall as sharply as he predicts. “This coming major risk-off phase will, in my view, also be very bullish for the dollar and core government bonds,” said Janjuah, who thinks 10-year debt in the U.S., Germany and the U.K. could hit just one percent, and who is predicting more quantitative easing from the Federal Reserve in December. Those hoping for a big bazooka from the Fed or the European Central Bank before December will be disappointed, he said.”

If we assume this prediction is correct, we would likely see the S&P 500 Bullish Percent reverse into a column of O’s showing S&P 500 stocks giving sells signals.  Attached is the Bullish Percent chart for the SPX.  This chart has been in a column of X’s since June 19, 2012.  

I have also attached a Point and Figure chart for the S&P 500 (SPX).  If this prediction is correct, there are several support areas that would have to be broken for this index to fall 25%.  I have drawn in support lines which could be used as sell stop areas to protect capital.  I will let the bullish percent charts help me manage the risk and I will leave the predicting to others. 

We are getting ahead of ourselves with this talk because at this point, we have the offensive team on the field and the S&P 500 technical chart is not showing signs of a down turn.  Here are the indicators. 

NYSE BULLISH PERCENT:  We remain on offense.  This indicator has moved to a level of 60% bullish.  Yes, the risk is higher now than it was in July when this reversed up, but it is still on offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator has been as high as 74% recently.  It remains in a column of X’s at a level of 69.29%.  If we start to see selling pressure on this short term chart, it will start to indicate a change in risk and appropriate action can be taken.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks just reversed back to offense as I reported earlier this week.  This has climbed to 46.29% bullish.  No sign of a reversal at this time.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator, like the NYSE High Low, remains in a column of X’s.  The current risk level is 58.34% bullish.  This is something to watch for trading moves.  Offense at this time.

SECTOR DISTRIBUTION CHART:  Click Image

This past week we had 20 sectors move higher and no sectors declined.  We have 33 of the 40 sectors in a column of X’s and demand.  One of the lowest sectors, Precious Metals is at 31.30% bullish.  Below is a chart of the SPDR Gold Trust ETF (GLD).  It just completed a double top buy signal at 160 showing more demand for this index.  We may start to see this sector do better as demand increases.  When GLD peaked in November at $174, we had 78% of the Precious Metals stocks on buy signals.  The risk is less now with 31% of the stocks on buy signals.

DOW JONES CORPORATE BOND INDEX:  The past couple of weeks we have discussed how both the short term chart and the long term chart have reversed to a column of O’s.  This is a warning sign to re-examine your holding to determine if any defensive action is warranted.  The markets are waiting for Ben Benanke to announce another Quantitative Easing strategy.  Maybe this chart is telling us we won’t get one?  Caution, but the short term and long term charts are on buy signals.

RELATIVE STRENGTH:  We continue in the same order as last week:  Domestic Equity, Fixed Income, Foreign Currency, International Equity, Cash and Commodity.  We are seeing a bit more strength in both International Equity (remember, World Bullish Percent has reversed up) and Commodity.  The monthly momentum for Commodity has reversed up after being negative for 15 weeks.  Also, we have seen the Gold ETF (GLD) give a buy signal so we may see Commodity starting to strengthen again.

Call or email any questions.

Something thing to remember about the Bullish Percents.  Each stock gets one vote.  A stock like Apple (AAPL) can impact a cap weighted index but it only counts as one stock in the bullish percent calculation.  This reversal in the OTC BP shows us that 48% of the OTC stocks are now on buy signals.  This is much lower than the NYSE.  You will notice in recent years we have not been able to get this chart above 64% bullish showing that  fewer OTC stocks are participating in the advance.

This reversal shows the demand for stocks is broadening out and we are seeing more OTC stocks giving point and figure buy signals. 

Call or email me any questions.

On July 3, 2012, we again had demand returning to equities as the NYSE Bullish Percent reversed back to offense.  This past week the NYSE Bullish Percent increased another 2% showing that more NYSE stocks moved from sell signals to buy signals.  Last week I also mentioned that the “NYSE Multiple Buy Signal” chart had reversed back to a column of X’s.  These are all signs of an improving outlook for domestic stock prices.  We don’t know how long the demand will continue so for now, we assume the best.  Here are the indicators this week. 

NYSE BULLISH PERCENT:  The main coach for NYSE stocks remains on offense.  We have moved to a level of 58.07%.  We reached a high of 76% in February 2012.  No sign of a change in direction at this time.

NYSE% ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator remains in a column of X’s and on a buy signal.  This indicator is most effective for short term changes in demand.  We have 69.69% of the NYSE stocks trading above their 50 day moving average.  This bottomed in June at 14%.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks continues to be in a column of O’s.  The current risk level is 45.29%.  The last time we had the OTC BP at a 70% level was in January 2004.  We are getting closer to the 46% level which would put OTC stocks back in a column of X’s.  If that should that happen, we would likely see a broadening of stocks doing well.

OTC % ABOVE 10 Week Moving Average:  This short term indicator is in a column of X’s and a buy signal.  The current risk level is 55.74%.  In February we were at 82% bullish so more room to the upside.

SECTOR DISTRIBUTION CHART:  Click Image

We continue to see signs of demand increasing.  Precious Metals and Metals (non Ferrous) are bring up the tail but they are both in a column of X’s now.  We have 11 sectors in a column of O’s and 29 sectors in a column of X’s.  The average risk is 49.26%.

DOW JONES CORPORATE BOND INDEX:  This chart remains on a buy signal for both the longer term and shorter term charts.  Both the long term and short term charts have reversed into a column of O’s.  The charts are showing the short term selling pressure that is happening to corporate bonds.  I have also attached a chart of the 30 Year Treasury Yield Index (TYX).  Since it’s low yield of 2.475% set in July, we have seen the yield on the 30 Year Treasury climb to 2.90%.  From the chart, you can see we broke through the down trend line at 2.80%.  I have also attached a chart of the Ishares 20 Year Treasury Bond Fund (TLT).  You can see the prices have broken through the uptrend so we could expect further selling pressure on the 20 Year Treasury Fund.  For now, we would say the trend is lower treasury bond prices and higher interest rates.  What is unknown is “why” this is happening.  My guess is investors see better upside in stock prices than bond prices from these levels.  Any other guesses?

RELATIVE STRENGTH:  The current order is:  Domestic Equity, Fixed Income, Foreign Currency, International Equity, Cash and Commodity.  We are seeing further improvements in the International Equity ranking but not enough to move it higher.  The Domestic Equity sector moved into the #1 position on October 24, 2011.  The S&P 500 Index (SPX) has gained 12% since then.  These Relative Strength changes tend to remain in motion for long periods of time.

Please me know if you have any questions.  

These comments are as of Wednesday, August 8.  I had completed them, but forgot to publish them.  I must have been thinking about motorcycling.

Normally when I leave the office for a few days the markets get hit.  This year we continue with demand in control so we have continued making further progress in the major indexes.  One of the longer term charts I follow is the NYSE Multiple Buy Signal Bullish Percent Chart.  As the long name implies, this measures the percent of NYSE stocks that have given more than one buy signal.  This chart reversed into a column of X’s on August 7.  It has been in a column of O’s since May 8, 2012.  This chart is not effective for trading since it moves slowly.  It forecasts pretty well the longer term picture. 

We are also starting to see more demand for International Equities.  Here is a chart of the Ishares MSCI EAFE Index Fund (EFA).  This has broken a quadruple top and has returned to a positive trend.  Click Image

Here are the balance of the indicators this week.

NYSE BULLISH PERCENT:  The main coach remains on offense suggesting higher stock prices.  The current risk level is 56.61%.  Offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term chart remains on a buy signal.  The chart has moved above 70% for the first time since February of this year.  The current risk level is 71.41%.  This chart can remain above 70% for extended periods of time.  We will watch for trading moved below 70%.

OTC BULLISH PERCENT:  The main coach for OTC stocks has not yet been able to garner enough net new buy signals to reverse this chart.  We  have 44.30% of the OTC stocks on buy signals and we won’t reverse to offense until we reach 46%. 

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator remains on a buy signal at a level of 57.25%.  There is a lot of room to move higher from here.

SECTOR BULLISH PERCENT CHART:  Click Image

We continue see movement, especially this past week.  Of particular interest is to see the Semiconductor Sector reverse to bull alert.  It is difficult to get a sustainable market rally without participation from semiconductors so this is encouraging for further advances.  We have 26 sectors in a column of O’s with several reversals over the past week. 

DOW JONES CORPORATE BOND INDEX:  Same story, longer term–demand in control of bond prices.  The short term chart reversed to a column of O’s this week so we may see some short term profit taking in bond prices.  This suggests some selling of bonds to buy stocks.

RELATIVE STRENGTH:  The order is Domestic Equity, Fixed Income, Foreign Currency, International Equity, Cash, and Commodities.  Oil prices are moving again so we may see some more demand for Commodities.  Also, I mentioned above, the International Equity picture is starting to improve.

Please give me a call or email me any questions on the indicators.

 Since the NYSE Bullish Percent (the main coach), reversed to offense on July 3 we have made pretty good progress in the technical indicators.  In the past week, we have started to see some pressure on the short term indicators but the longer term indicators are mostly unchanged.  Here are the indicators.

NYSE BULLISH PERCENT:  The main coach is still in a column of X’s at a level of 51.72%.  Our recent high was 54.26%.  We continue to play offense but also suggest that sell stop orders be used for stock purchases. 

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is in a column of O’s and has broken a double bottom sell signal.   This is a reason for short term concern and also for tightening up sell stop orders.  The NYSE High Low is also in a column of O’s so use caution.  This has fallen from 68% bullish to 48.33%.

OTC BULLISH PERCENT:  This indicator has been in a column of O’s since May 7.  No sign of a move back to offense.  To get a sustainable rally we need both NYSE and OTC stocks to show demand.  This indicator is at 41.77%.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator for OTC stocks is in a column of O’s so caution.  The risk level is 44.18%.

SECTOR DISTRIBUTION CHART:  Click image

We see additional slippage in the number of sectors in a column of X’s.  The average risk is 44.26%.  We have 23 sectors in a column of X’s.  Sectors that reversed down were Forest and Paper, Internet, Transport non air, Retail, Building and Wall Street.  This is a good reason to check individual positions and develop a strategy, even if the strategy is to do nothing.

DOW JONES CORPORATE BOND INDEX:  This remains the same.  Longer term, we remain on offense with demand for bonds. 

RELATIVE STRENGTH:  The ranking’s remain the same (Domestic Equity, Fixed Income, Foreign Currency, International Equity, Cash and Commodity).  We still fail the Cash Bogey check for the following:  Domestic Equity, International Equity and Commodity.  These relative strength indicators are longer term indicators.

I will be out of the office starting Friday July 27 and returning on August 6.  I am motorcycling to the Blue Ridge Mountain area of NC, TN and VA.  There will be 4 of us traveling together.  We might slightly resemble the Wild Hogs.  Heather and Erica will be in the office to help as needed.  Thanks for your interest in the technical comments.

The low interest rates continue to benefit borrowers and at the same time, they are hurting savers.  Here is a chart that shows the percent of income that comes from interest and as you would imagine, interest income in declining significantly.  Click the image to get the full picture.

Here is a run down of the technical indicators I am following:
NYSE BULLISH PERCENT:  The main coach continues to suggest offense.  We now have 53.50% of the NYSE stocks on buy signals.  Accumulate equities.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator has been making higher lows since June.  It has now reached a level of 68.61%.  We are approaching the 70% level where we start watching for a change in appetite for risk.  For now, this short term chart is suggesting offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks has not yet made it back into a column of X’s.  It remains in a column of O’s and on defense at a level of 43.22%.  Reversal back to offense happens at a level of 46% so we are making some progress toward that level.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is currently in a column of O’s but on a buy signal.  The current risk level is 57.29% so we would expect further advances.

SECTOR DISTRIBUTION CHART:  Click Image

Most of the activity was to the upside with 11 sectors moving higher.  The average bullish percent reading has moved to a level of 46.59% so not near the “high risk” area yet.  Precious Metals can’t seem to come off the bottom.  Where are the $2000 an oz. folks when you need them?  Oil has moved from 16% bullish to 38% bullish.  The green or favored sectors are areas of strength.

DOW JONES CORPORATE BOND INDEX:  Same old story.  Demand in control.  The short term chart is extended so we may see a pull back in bond prices short term.

RELATIVE STRENGTH:  The relative strength order has not changed this week but the fact that the strongest sector, Domestic Equities, can’t pass the Cash Bogey check is a reason for caution.  The current ranking’s are Domestic Equity, Fixed Income, Foreign Currency, International Equity, Cash and in last place Commodity.  Only Fixed Income and Currency pass the Cash Bogey check.  These relative strength readings tend to be longer term in nature.  Domestic Equities has been leading the pack since January 10, 2012. 

Give me a call with any questions or drop me an email.  Drop in if you are going to the Street Fair.  We have lemonade and cookies for you.  We have new email addresses at Alerus Securities.  My new email address is keith.burck@alerus.com. 

I have attached a point and figure chart of the Dow Jones Industrial Average.  You see a pattern of higher lows and higher highs since the June low of 12,050.  If we break the support and close below 12,450 then the next support level will be the June low.  Time will tell.

Here are the technical indicators this week.

NYSE BULLISH PERCENT:  The main coach reversed into a column of X’s last week which effectively puts the offensive team on the field.  This is encouraging and at this point it suggests a more “offensive” strategy of accumulating stocks.  As we begin a new cycle of further stock demand we also suggest sell stop orders or closely watching the indicators for any sign of a change.  For example, if the Dow does break down we will likely see other stocks sell off, even though the Main Coach is on offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator did reverse into a column of O’s last week but it is still on a point and figure buy signal.  This indicator hit a high of 68% bullish before backing down to a level of 57.78%.  This short term indicator has moved from a low of 14% bullish in June.

OTC BULLISH PERCENT:  The main coach for OTC stocks suggests defense.  We have not yet had enough OTC stocks move from sell signals to buy signals.  Only 42.67% of the OTC stocks are on buy signals so 57.33% are on sell signals. Caution.

OTC % ABOVE 10 WEEK INDICATOR:  This short term indicator also managed to slip into a column of O’s suggesting short term selling.  This indicator also remains on a buy signal at this time.

SECTOR DISTRIBUTION CHART:  Click Image

As you can see the percent of stocks on buy signals has increased to 45.45%.  This was as low as 38% on June 5.  We now have several sectors that have reversed back to a column of X’s so we will have to see how the struggle between buyers and sellers plays out.

DOW JONES CORPORATE BOND INDEX:  No change–buyers control bond prices both short term and long term. 

RELATIVE STRENGTH:  The relative strength order is as follows:  Domestic Equities, Fixed Income, Foreign Currency, International Equity, Cash and in last place, Commodities.  Domestic Equities, International Equities and Commodities all fail the Cash Bogey check, hence a reason to be cautious toward these asset classes. 

Let me know if you have any questions on the indicators.  At this point we are cautiously optimistic.

I wanted to alert you to the fact that the Main Coach, the NYSE Bullish Percent, has reversed back into a column of X’s and demand.  This puts the offensive team on the field.  The risk level is 52.18%.   This reversal happened at a level of 50% bullish.  We have been on defense since April 10 and as I mentioned in last weeks comments, the sellers were wearing out.

As a bit of history, we hit 44% bullish on November 23, went to offense on December 6.  We remained on offense until April 10 where we started a decline from a level of 76% bullish reached on February 17.  This decline took us back to the 44% level on June 4 and the subsequent reversal back to offense on July 3.  This reversal does not mean we won’t see stock market declines but it is certainly encouraging to see demand taking control again. 

I will get out a full report next week.  Enjoy the weekend.

I commented yesterday that we also had the European Bullish Percent reverse back into a column of X’s and bull alert.  Now I see why the European Bullish Percent was reacting more bullish.  Lots of headlines today about the central banks, the Eurogroup and the commission pulling out the right card at the right time giving access to the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM) to support their bonds.  This is the type of news that makes speculating on what might happen so difficult but it is also what makes trend following effective over the longer term.  Trend following or momentum can’t stay wrong.  When the momentum shifts, so do the indicators. 

Today is a “risk on” day so now we will see if our longer term indicators can continue to improve enough to get reversals back to offense.  We know the short term indicators have been suggesting offense for the past 3 weeks.

Have a great weekend.

Hard to believe—in just a couple of days the year is half over.  We started out the month with a sell off in the major indexes and now are making some progress towards recovering this loss.  Looking back at June 1, we find there were just 3 sectors in demand on the Sector Distribution Chart.  Today we have 13 sectors in a column of X’s.  We have seen some improvements in our technical indicators but the improvements have been limited to the short term indicators.  There has not been enough demand or buyers to reverse the pattern we have been in since April 10 when we went to defense.  One of the better performing sectors this year has been the Home Builders.  That might be surprising to those listening to the talking heads on CNBC.  There is also demand for the largest companies such as those represented by the Guggenheim Russell Top 50 ETF (XLG).  The XLG chart is currently in a “triangular pattern” showing the struggle between buyers and sellers.  How this chart breaks might give us some idea as to the near term direction for stocks. 

Here are the technical indicators this week.

NYSE BULLISH PERCENT:  The main coach remains on defense and has been since April 10.  We continue to look for any signs of a shift in demand.  At this point, we have 48.16% of the NYSE stocks on buy signals.  Defense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is back in a column of X’s this week.  It remains on a buy signal, has broken two double tops, and is at a current level of 38.62%.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks is also on defense.  The current risk level is 39.89% so less risk now than the 56% bullish we were in March.  Defense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term chart is back in a column of X’s showing demand.  We now have 42.05% of the OTC stocks trading above their 50 day moving average.  Offense.

SECTOR DISTRIBUTION CHART:  click image

Some improvements this week.  The average risk is now at 41.15%.  Aerospace is close to a reversal up–must be the lower oil prices helping out these stocks.  Restaurants are also close to reversing back to a column of X’s.  Just 13% of the precious metals stocks are on buy signals.  How long before demand returns to this sector?  Electric Utilities remain firmly in a column of X’s with 67% of these stocks on buy signals.

DOW JONES CORPORATE BOND INDEX:  Nothing new to report.  Demand controls bond prices and the short term and long term charts remain in a column of X’s.

RELATIVE STRENGTH:  The real news this past week is Commodities have now dropped into last place behind Cash.  The ranking’s are Domestic Equities, Fixed Income, Foreign Currency, International Equity, Cash and Commodities.

One interesting development to watch is the Bullish Percent for European stocks.  This has reversed back into a column of X’s at a level of 38%.  I know we hear a lot of noise about the PIGS countries (Portugal, Italy, Greece, and Spain) but the companies from these countries account for less than 10% of the European stocks.  The United Kingdom and Germany account for the bulk of the companies.  This is a ray of hope for International Equities.

Have a great Independence Day on the 4th.  I will be out of the office next week so I won’t be making a technical comment unless we have some significant changes.  I am looking forward to a week at the lakes in MN.

I keep a file of previous stock disasters and I recently ran across one I saved from November 2001.  This is an absolutely classic report.  In this case, the analysts from Credit Suisse (I won’t mention their names to protect the guilty) downgraded Enron from a strong buy to a hold.  Enron was trading at that time at a price of $.61.  It had declined from a 52 high of $84.63.  Enron eventually declared bankruptcy but not before creating significant losses for many mutual funds and institutional money managers.  The stock had given numerous point and figure sell signals showing that the sellers knew something the buyers did not know.

As we watch what is happening with the markets versus what is suppose to happen, we find that more money is flowing into stocks as they have declined and the risk has decreased.  If we look back over the past 3 months we find that the NYSE Bullish Percent was at a level of 75.95% on March 19.  By April 19, the NYSE BP had reversed to a column of O’s (supply and defense) and had declined to a level of 67.41%.  The break below 70% was negative.  By May 19, the NYSE BP had declined to a level of 49.49% and by June 19, we are at a level of 47.39%.  We have actually increased over the past 2 weeks from a low of 42.66%.  The Main Coach (NYSE BP) will signal the offensive team back onto the field at a level of 50% so we are not there yet but we are making progress toward that level.  The NYSE BP is not a market timing tool, it is a risk management tool.  Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach is still in a column of O’s at a level of 47.39% and on defense.  We are seeing other shorter term indicators move to demand such as the S&P 500 Bullish Percent, the World Bullish Percent and the Nasdaq Bullish Percent. 

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator continues to be offensive at a level of 45.36%.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on defense as well.  The current risk level is 40.73%.  This is down from a high of 56% bullish in March.  Defense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator remains in a column of X’s and demand at a level of 44.36%.  Offense.

SECTOR BULLISH PERCENT CHART:  Click Image

You can see the sectors which have reversed up over the past week.  They are in capital letters.  A reversal up is evidence that at least 6% of the stocks in that sector have moved from point and figure sell signals to point and figure buy signals.  This demand, when it comes from low risk levels, can present good trading moves so any purchases should be hedged with sell stop orders until the main coach goes back to offense.

DOW JONES CORPORATE BOND INDEX:  Nothing new here.  Demand is in control with both the short term and long term charts in a column of X’s.

RELATIVE STRENGTH:  The Relative Strength order remains the same as last week.  From highest to lowest it reads Domestic Equities, Fixed Income, Foreign Currency, International Equity, Commodities and Cash.  Those asset classes that fail the Cash Bogey Check are Domestic Equities, International Equities and Commodities.  These relative strength charts are longer term in nature and they give a big picture perspective of the asset classes.

Here is some good news for gasoline prices but bad news for energy stocks.  Here is a chart of the United States Gasoline Fund (UGA) which is a way to manage exposure to energy.  The ETF is designed to track, in percentage terms, the movements of gasoline prices.  The chart broke a spread triple bottom in April at $55.50.  The next support is the October and November low of $45. 

Enjoy the weekend.  Let me know if you have any questions.

The main coach (NYSE Bullish Percent) remains on defense however, we have discussed over the past two weeks how the short term indicators have reversed to offense from low risk levels.  We have also seen the Nasdaq non financial (NDX) Bullish Percent  reverse back to offense.  On Tuesday June 19, we had the S&P 500 Bullish Percent reverse back to offense.  Last week I showed how the S&P 500 ETF (SPY) was acting very well “technically” after the pull back which started in April.  The weekly momentum for the SPY has turned positive after being negative since March 9, 2012.  The World Bullish Percent also reversed back into a column of X’s.  This has been in a column of O’s since March 27, 2012.  These are encouraging signs for further stock market advances.

We are seeing some of the sectors reverse back into a column of X’s or demand as well.  Click image below. 

These sectors have reversed back to a column of X’s or demand:  Metals (non Ferrous), Steel, Autos, Chemicals, Machinery & Tools, Software, Textiles, Forest & Paper and Wall Street.  The join Electric Utilities which has remained in a column of X’s.  The average risk is now at 42.03, still very low compared to March when the average risk was over 60%.

Market tops and market bottoms happen over time.  The weight of the evidence suggests this pull back has come to a conclusion with demand taking control of stock prices.  We continue to monitor the “Main Coaches” for further evidence of offense taking over. 

Call me with any questions at 701-280-5031 or email me at kburck@alerusmail.com

The $2 box chart shows the triple top buy signal given in January 2012 (NYSE BP was on offense).  The chart reversed down to a column of O’s on April 10 (same time the NYSE BP went to defense).  On June 11, this chart  reversed back into a column of X’s setting up double bottom support at $128.  This $128 level was also the resistance level in October, November 2011 and January 2012.  The short term indicators are back on offense for both NYSE and OTC stocks so that is encouraging for potentially higher prices for this ETF.  The Bullish Percent for the S&P 500 (SPX) is .70% away from reversing back to a column of X’s and demand.  We don’t anticipate but that is also encouraging.  A sell signal would be given at $126.

Click Image below for $1 Box Chart

This $1 box chart shows this ETF breaking a triple top in June to hit $134. This is bullish as it shows demand increasing.  After hitting a high of $142 in April and a lower high at $141 in May, this “faster” chart broke a triple bottom at $135 giving a trader’s sell signal.  The prices dropped to $128 before buyers came back in and pushed the price back to $134.  The $128 level is near term support.

With all the “noise” on CNBC about Greece, Italy and all of Europe it can be beneficial to ”see” what investors are doing with their dollars.  The $50 Visa gift card goes to Arthur ND.

Call or email me any questions you might have.

Here are some of the short term positives:  The NYSE 10 Week Indicator broke a double top and gave a buy signal from over sold levels below 30% bullish.  The NYSE High Low also reversed back into a column of X’s from over sold low risk levels.  The OTC 10 Week indicator reversed into a column of X’s and bull alert status.  The 30 Week Indicator chart for both NYSE and OTC stocks has reversed into a column of X’s.  

Here are the negatives:  The Main Coaches for NYSE, OTC, Optional stocks, the S&P 500 and the World Bullish Percent are all still on defense and a column of O’s.  For these charts we will have to see a net 6% of these stocks move from sell signals to buy signals.  That will take some time so be patient.

Here is a quiz to see who is paying attention.  I have included a point and figure chart below with no name on it.  From the evidence you see on this chart would you buy this investment?  Here is some of the evidence:  This is trading above the bullish support line or in a positive trend (red line going back to October 2011).  It is on a triple top buy signal given in January.  It has subsequently consolidated back to $128 after peaking at 142 in April (Main Coach reversed down in April).  This month the chart reversed back into a column of X’s.  The near term support is at $128 where a break of that level to $126 will put the stock on a sell signal.  So, would you buy this based on the chart?  Email me yes or no.  There will be a drawing for a $50 Visa gift card from those that respond.  On Friday, I will reveal the investment.  Click on the image to enlarge.

Here are the technical indicators this week:

NYSE BULLISH PERCENT:  We remain on defense like we have been since April 10 (2 months already).  The current risk level is 43.85% so less risk now than in April but still in control of sellers.

NYSE % ABOVE 10 WEEK MOVING INDICATOR:  This short term indicator reversed back into a column of O’s this week but at this point it is on a double top buy signal.  Short term offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks is also on defense.  We have 38.76% of the OTC stocks on buy signals (61.24% on sell signals).  We are not close to reversing back to offense at this time.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is in a column of X’s and bull alert at 28.28% bullish.  Offense.

SECTOR DISTRIBUTION CHART:  Click Image

As you can see, we still have all sectors in a column of O’s with the exception of Electric Utilities which is in a column of X’s and at 70%.  Demand remains in this sector.  Other sectors holding up are Banks, Insurance, Savings and Loans (very small sector), and Real Estate.  The commodity based sectors are the most over sold at 0-20%.  The most over sold sectors are Metals non ferrous, Precious Metals, Steel,  and Oil.  The average risk is now 38.88%.  This is a lower risk chart than we had in March and April when the average risk was over 63%.  A picture is worth a thousand words.

DOW JONES CORPORATE BOND INDEX:  This story remains the same–demand in control of corporate bond prices.  Both short term and long term charts are in a column of X’s. 

RELATIVE STRENGTH:  The order of the relative strength asset classes are:  Domestic Equities, Fixed Income, Foreign Currency, International Equities, Commodities and Cash. Commodities, the second lowest relative strength asset class, matches up with the Sector Distribution Chart showing commodity sectors are at the lowest risk but also the lowest demand.  Those asset classes that fail the Cash Bogey Check are Domestic Equities, International Equities and Commodities.  The asset classes that pass the Cash Bogey Check are Fixed Income and Foreign Currencies. 

To summarize, I am showing again what has historically happened when we have a 10% correction in the S&P 500.  There have been 93 corrections of 10% in the S&P 500 going back to 12/31/1927.  Of those corrections, 13 or 14% resulted in additional draw downs of 20% or more.  Of these 93 corrections, 38 or 41% failed to decline any more than 5% after entering a 10% “correction”.  After reaching the 10% correction status the average stock market decline took 49 days to find a bottom and the median number of days to find a bottom was 25 days.  We had 26 corrections find a bottom within one week of the correction status (I like that).  Some of the worse corrections after reaching the 10% correction status occurred in June 1932, October 1937, May 1970, October 1974, October 1987, July 2002 and October 2008. 

Happy Flag day to each of you.  Remember to email me your vote on the “un-named point and figure chart” above.

Now that you have had a history lesson, let’s look at the recent action in the Dow Jones Industrial Average (DJIA).  On June 6, the Dow closed at a level of 12,414.  On May 31, we closed at 12,393 or 21 points lower than the June 6 close.  If you remember Friday May 31 was a difficult day for this index.  A big down day and a big up day leaves us about even.  We started the year at 12,397 so we are 17 points higher than we started the year and it took the biggest daily gain of the year to get us back above where we started the year.  Prior to last weeks sell off we were stuck in a Dow trading range from 12,300 to 12,600.  Until we break above the top end of that range (12,600) we are still in a trend of lower highs and lower lows for the Dow. 

The nice thing about the Bullish Percent charts is each stock gets one vote–there is no cap weighting.  A stock is either on a point and figure buy signal or a point and figure sell signal.  We are measuring the percent on buy signals versus the percent on sell signals.  On April 10, the percent of stocks on buy signals declined by 6% effectively putting the defensive team on the field.  We went from 76% of the NYSE stock exchange stocks on buy signals to a current level of 42.84% of the NYSE stocks on buy signals.  The “risk” has decreased.  We are still on defense but the short term indicators are getting oversold so hopefully we start to find some traction again.  Here are the indicators:

NYSE BULLISH PERCENT:  The main coach remains on defense this week.  We now have 42.84% of the NYSE stocks on buy signals.  This suggests caution but we have also removed a lot of risk from the market.  Defense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is now back in a column of X’s.  We put in a double bottom at 14%.  This indicator has climbed to 24.66% and bull alert.  The NYSE High Low, another short term indicator also moved back into a column of X’s yesterday from a low risk level.  These are bullish short term changes.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on defense.  We have 38.40% of the OTC stocks on buy signals and we are  still in a column of O’s.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator for OTC stocks also reversed up to a column of X’s and bull alert status.  Again, a good sign for the short term.

SECTOR DISTRIBUTION CHART:  Click Image

The sector distribution chart declined to a level of 38.35%.  Only one sector above 70%.  Those sectors below 30% are the most “oversold”.  For example, we have only 14% of the oil stocks on buy signals.  Should the percent of oil stocks on buy signals reverse back to a column of X’s it will show demand increasing for this sector.  I have recently discussed how bottom fishing or toe dipping into stocks at these low risk levels can make sense for investors. 

DOW JONES CORPORATE BOND INDEX:  Wow, I am amazed by the interest rate levels around the world.  The Dow Jones Corporate Bond Index is suggesting “offense” or lower interest rates, higher bond prices. Here is a look at interest rates around the world.  Click Image.

RELATIVE STRENGTH:  We had more changes in our Relative Strength charts this past week.  Domestic Equities remains in the #1 position but it now fails the Cash Bogey check.  This is a reason for caution and reflects the fact that stocks, relative to cash are now struggling.  The number 2 position is held by Fixed Income which still passes the Cash Bogey check.  The number 3 position is held by Foreign Currencies which passes the Cash Bogey check.  The remaining three are Commodities, International Equities which both fail the Cash Bogey check and last place is held by Cash.  

Call or email to discuss specific strategies.

The real news today is the drop in interest rates.  The Dow Jones Corporate Bond Index has been in a column of X’s and on a buy signal for some time suggesting lower rates.  As I write this, the 5 year treasury is yielding 0.60% and the 10 year treasury is yielding 1.45%.  The Long Bond (30 year treasury) has a current yield of 2.52%.  As a baby boomer, I bought my first house with an interest rate of 11%—that hardly seems believable with today’s low rates.  

The poor jobs report is the reason for the stock and bond reaction.  The markets will now wait to see if the Federal Reserve implements another Quantitative Easing strategy.  This news will likely make for a long summer of campaigning by the political parties. 

Call or email me with any questions.

That really clears it up for me.  Wow!  Price is really the best measurement because it reflects supply and demand and ultimately the irrefutable law of supply and demand will win out.

We continue with the defensive team on the field.  The risk has declined from the time we went to defense on April 10.  At that time we had 76% of the NYSE stocks on buy signals.  Today we have less than 50% on buy signals.  With less than half the stocks on buy signals there are numerous companies that have declined in price presenting better buying opportunities.  We have seen volatility spike again as the CBOE Volatility Index (VIX) has again climbed over 20.  This closed on Wednesday at 24.14 for a 12.88% increase in price.  Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach remains on defense.  The current reading is 48.52%.  It would take a move to 56% bullish to change from defense to offense so that will take some time.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator declined this week but managed to stay in a column of X’s.  The current reading is 20.49% so still at a low risk oversold level.

OTC BULLISH PERCENT:  The main coach for OTC stocks, like the NYSE BP, remains on defense as well.  We have 41.11% of the OTC stocks on buy signals.  Like the NYSE BP, there is no sign of a turn  back to offense at this time.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator has been in a column of O’s since May 4.  The current reading is 24.38% so below 30% in lower risk levels.  Defense.

SECTOR DISTRIBUTION CHART:  Click Image

We had further declines in the sector charts this week.  There were 15 sectors that moved lower and none moved higher.  We still have only 3 sectors in a column of X’s so much lower risk than in early March.  We are starting to stack up sectors on the left side and that is where opportunities will be made available for low risk investing.  The average risk is 42.51%.

DOW JONES CORPORATE BOND INDEX:  This chart is unchanged–long term chart in a column of X’ and the short term chart still in a column of O’s suggesting lower corporate bond prices short term, but longer term, bonds are still in demand.

RELATIVE STRENGTH:  We continue with Domestic Equities in the #1 spot based on relative strength.  The remaining asset classes based on their relative strength rank are Fixed Income, Foreign Currency, International Equities, Commodities, and Cash.  Both Commodities and International Equities fail the Cash Bogey check so that is not a sign of strength but further weakness.

Give me a call or email me to discuss specific strategies or with questions.

We had the NYSE 10 Week Indicator reverse back to a column of X’s from a low level of 13.37%.  That is encouraging.  We also had the Weekly Momentum chart reverse back to a column of X’s.  On occasion the stock market gets very oversold, down to levels of 85% oversold like August 8, 2011 or October 9, 2008 when the market was 109% oversold or February 7, 2003 when we hit a level of 114% oversold.  In a normal correction (there is nothing normal about corrections but you know what I mean), we get to a level of 50% oversold.  In recent corrections we hit these oversold levels: now 48%, October 2011 48%, June 2010 48%, March 2009 64%.  We have the Dow Jones Industrial Average holding a double bottom at 12,350 so that is encouraging as well.

Here is a visual of an overbought and oversold OEX index which is large cap US stocks on March 31, 2012 vs. May 23, 2012.  Click Image

Here are the indicators.

NYSE BULLISH PERCENT:  The main coach remains on defense at a level of 48.32%

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  As mentioned above, this short term chart has moved back into a column of X’s.  This gives traders an opportunity to step into some oversold stocks–with sell stop orders in place–with the goal of catching the first move off the bottom.  Sell stop orders are in place in case you are wrong.

OTC BULLISH PERCENT:  The chart is also on defense at 41.30%.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term chart in still in a column of O’s at an oversold level of 22.19%.  Defense.

SECTOR DISTRIBUTION CHART:  Click Image

You can see how risk has shifted to the left side.  Three sectors remain in a column of X’s (Real Estate, Elec. Utilities and Biomedic).  More sectors are approaching the 30% low risk level.  When will demand return?

DOW JONES CORPORATE BOND INDEX: The long term chart remains in a column of X’s and the short term chart has reversed to a column of O’s but remains on a buy signal.  The 10 Year Treasury hit a yield of 1.72% this week.  There are 275 S&P 500 stocks that yield more than the 10 Year Treasury.  The average yield of these 275 stocks is 3.33%.  Food for thought.

RELATIVE STRENGTH:  Domestic Equities still holding the #1 spot.  Fixed Income moved into 2nd place.  Foreign Currencies is in third place followed by Commodities which now fails the Cash Bogey check.  As Commodities moved to 4th place, International Equities declined to 5th place and also fails the Cash Bogey check.  Last place is Cash.

Have a good Memorial Day Weekend.  Email or call with questions.

We had the CBOE Volatility Index (VIX) declining over 11 1/2% today.  Here is a look at the Sector Distribution Chart as of Friday.  This is a much more encouraging picture for investing than when we had every sector in a column of X’s and demand was high. (click image)

As I frequently do, I want to remind you these technical indicators are not useful for predicting what other investors or the major indexes might do.  With the Bullish Percents, each stock gets one vote so no cap weighting to distort the picture.

Call or email me any questions.   

One interesting phenomena of this recession is the demand for cash and savings versus investing.  Look at these charts and think about what they are telling us about investor psychology.  Cash is king, even at zero interest rates.  The Core Affluent and the 1 percenters are socking away serious cash.  What has them so anxious? 

Here are the technical indicators this week.

NYSE BULLISH PERCENT:  We remain on defense and in a column of O’s.  We dropped to a level of 55.31% bullish this week.  No sign of a turn in this indicator.  It would take a shift of 6% of the NYSE stocks from sell signals to buy signals to move back to offense.  Caution.

NYSE % ABOVE 10 WEEK INDICATOR:  A further decline to 24.30%.  I commented yesterday that this is where we start getting more interested in looking at strong relative strength stocks.  This short term indicator is bearish but from these levels we have already washed out some of the risk.  Defense.

OTC BULLISH PERCENT:  The main coach for OTC stocks is now at 45.38%.  Sellers have control.  Facebook, no matter how big it becomes, gets just one vote, like every other stock.  No cap weighting in the bullish percents.  Defense.

OTC %ABOVE 10 WEEK MOVING INDICATOR:  We moved to 28.94% so like the NYSE 10 Week Indicator we are now below 30%.  Caution but more encouraging than the 82% bullish we were in February.

SECTOR DISTRIBUTION CHART:  Click Image

As you can see, we continue to move more sectors from the right side (high risk) to the left side (low risk).  Notice which sectors are surviving this pullback.  They are Banks, Saving and Loans, Utilities and Real Estate.  On the left side we have Precious Metals, Metals non ferrous, Oil and Steel.  How long before Wall Street rotates back into the sectors they have rotating out of?  The average risk is 47.90%.  Caution.

DOW JONES CORPORATE BOND INDEX:  We remain in a column of X’s both short and long term.  This is bullish for bond prices suggesting lower interest rates.  The 30 year treasury bond hit 2.89%.  The recent fears of inflation are being shifted into fears of deflation. 

RELATIVE STRENGTH:  Even with the recent pull back in stock prices, the Domestic Equities asset class remains as the top relative strength asset class.  Fixed Income is now in second place.  This has surpassed International Equities and Commodities which are third and fourth.  Commodities dropped below International Equities for the first time since early 2011.  Both International Equities and Commodities also failed their Cash Bogey check suggesting cash as a better relative strength asset class.  Foreign Currencies are in fifth place and bringing up the rear is Cash. 

Patience and perseverance are necessary as we work our way to what ever level we will bottom out at.  The Main Coaches and the short term indicators will guide us.  Call or email me with any questions.

The two short term indicators I comment on each week are the Ten Week Indicators.  They measure the percent of stocks that are trading above their 10 Week (50 day) moving average.  In February 2012, we had 88% of the NYSE stocks trading above their 10 week moving average.  When above the 70% level we consider the risk to be high.  This Indicator has now declined to a level 26.76%.  We now have less than 30% of the NYSE stocks trading above their 10 week moving average.  When we get below 30% we are in oversold markets.  Let me remind you that just because we are below 30% it does not mean that we can not go even lower.  In October 2011, we hit a level of 10%.  From below the 30% levels better buying opportunities become available and toe dipping into equities can start to make sense. 

It will take a lot more back and forth action for the Main Coaches to shift back to offense.  We  had the NYSE Bullish Percent reverse to defense on April 10th.  This indicator has declined to a level of 56.74% bullish from 76% bullish in April.

Call or email me any questions.

One indicator I usually don’t comment on is the Multiple Buy Signal Bullish Percent.  As the name implies, this chart measures the percent of stocks that give more than one or multiple buy signals.  It is a good way to see if there is going to be follow through after the first point and figure buy signal is given for a stock.  This chart moves very slowly but when it moves it usually stays on trend for a period of time.  The reason for the slower movement is a stock has to give two buy signals to get counted.  It is rare to get over half of the stocks on the NYSE to give more than one buy signal.  For some perspective, the Multiple Buy Signal Chart bottomed at a level of 3.88% on March 6, 2009 and then reversed back to a column of X’s on March 23, 2009.  The Dow Jones Industrial Average bottomed on March 9 at a level of 6440.  The NYSE Bullish Percent reversed up on March 12, 2009.  The Multiple Buy Signal Chart after reversing up on March 23 reached a high on September 21, 2009 at 48%.  More recently, this chart peaked on February 17, 2011 at 46% and reversed down on March 15, 2011.  It finally bottomed on October 4, 2011 at 9% and on October 24, 2011 it reversed back into a column of X’s showing more stocks giving multiple buy signals.  The Multiple Buy Signal chart peaked this year on March 27 at 40% bullish and then reversed to a column of O’s on May 8, 2012.  We know we have the defensive team on the field.  We anticipate more sellers than buyers.  The good news is we have also squeezed a lot of “risk” out of the market so we want to also be taking advantage of the lower prices as we wait for the technical indicators to firm up.  Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach has been on defense since April 10 when it reversed to a column of O’s at a level of 70%.  We have declined to a level of 60.20% bullish so caution and defense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator broke a double bottom this week and remains on a sell signal and in a column of O’s.  It declined to a level of 35.06% bullish so getting closer to the oversold level of 30%.  Defense.

OTC BULLISH PERCENT:  The main coach for OTC stocks finally reversed to defense earlier this week.  It has declined to a level of 47.85%.  We now have less than half of the Nasdaq stocks on buy signals.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This indicator has declined to a level of 34.66% so it is also getting closer to oversold levels.  Defense.

SECTOR DISTRIBUTION CHART:  Click Image

You can “see” how the risk has declined.  We no longer have as many sectors trading in the 70% range.  Precious Metals, Metals non ferrous and Oil are in the low risk levels below 30%.  How long before Wall Street decides they want to own those stocks again?  Isn’t it interesting that Real Estate has the highest bullish percent reading and remains in a column of X’s and a favored sector.  Average risk is now at 51.99% so certainly lower risk than the 60.81% we were when the NYSE Bullish Percent went to defense in April.  Encouraging.

DOW JONES CORPORATE BOND INDEX:  Both long term and short term charts are now back in a column of X’s which suggests higher bond prices and lower interest rates.  We have also seen the yields decline on treasuries bonds as people have sold stocks.

RELATIVE STRENGTH:  Not much change here in terms of ranking but we did have Commodities fail the cash bogey check.  That is probably not surprising when you look at what is at the bottom of the sector distribution charts.  The current rankings in order are Domestic Equities, Commodities, Fixed Income, International Equities, Foreign Currency and Cash.

Last weekend I was in Grand Forks for the UND Law School graduation ceremony.  My son Asa graduated along with two others from the Alerus family.  Other graduates were Mark Naumann’s (Relationship Manager) daughter Kate and Jim Faircloth’s (SVP Marketing) daughter Marcy.  It was a great day celebrating with the three new attorneys. 

Let me know if you have any questions on the technical indicators this week.

These indicators, which follow supply and demand, are suggesting that the supply side (sellers) are slowly taking control of the stock market from the demand side (buyers).  Having some cash available to take advantage of what may be better stock prices makes sense.  This is where sell stop orders can help you make your selling decisions.  Should the markets pullback your sell stop orders create the cash to make new buying decisions.

Email or call me with any questions.

The Dow (DJIA) is back to 52 week highs and many of the technical people suggest the Dow may be topping out.  Of course, you can find just as many experts who are suggesting the markets can move higher from here.  Here is an example of why you can’t use Bullish Percent Charts to time the market.  The Dow reversed to a column of O’s on April 4 and gave a triple bottom sell signal.  The NYSE Bullish Percent reversed to a column of O’s on April 10 giving a bear alert status by breaking 70% bullish.  The Dow finally bottomed on April 23 at a low of 12,810 and then the Dow went back on a point and figure buy signal on April 24 at a level of 13,100.  All while the Dow was moving higher the NYSE Bullish Percent has remained on defense.  This shows demand for blue chip stocks but there are fewer and fewer stocks participating in the advance so caution is advised. 

Here are the technical indicators this week.

NYSE BULLISH PERCENT:  The main coach remains on defense at this time.  This suggests “caution” as under the surface some stocks are giving sells signals.  This does not mean the Dow or S&P 500 can’t move higher.  The current risk level is 66.50%.  Defense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator moved back to a column of X’s and remains there at this time.  The current risk level is at 53.52%.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks is still in  a column of X’s and has been since January 10.  We are currently at 51.84%.  We hit a high of 56% in March and have not been able to move any higher.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is also in a column of X’s.  This is encouraging.  The current risk level is 47.76%.  Offense.

SECTOR DISTRIBUTION CHART:  Click Image

The Sector Distribution chart shows a few sectors still above 70% bullish but we are seeing more sectors decline.  The average risk is 57.10%. 

DOW JONES CORPORATE BOND INDEX:  This remains in the same place as it was last week.  Longer term chart in a column of O’s but on a buy signal.  The short term chart is in a column of X’s and a buy signal.  This suggests higher corporate bond prices or demand.

RELATIVE STRENGTH:  We had International Stocks move higher this week to over take Fixed Income.  Our Relative Strength order is Domestic Equities, Commodities, International Equities, Fixed Income, Foreign Currencies and Cash.  Domestic Equities continue to have the strongest hand. 

 Email or call with any questions.

 Here are the indicators this week.

NYSE BULLISH PERCENT CHART:  The Main Coach is still on defense suggesting caution.  The current risk level is 65.63%, still in a column of O’s.

NYSE % ABOVE 10 WEEK MOVING AVERAGE: This short term indicator is one that has reversed up and given a second buy signal.  We are in a column of X’s at a level of 49.75%.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks has managed to stay in a column of X’s while the NYSE BP is on defense.  We have 51.41% of the OTC stocks on buy signals so offense for OTC stocks.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator also reversed back to a column of X’s yesterday and put in a higher bottom.  Shorter positive for OTC stocks.

SECTOR DISTRIBUTION CHART:  Click Image

We had more sectors move down this past week.  We now have 28 sectors on defense and 12 on offense.  As the “risk” decreases we look for opportunities to buy at better prices.  The average risk has declined to 56.26%.  It will be interesting to see if/when demand comes back into Precious Metals stocks.  They are the lowest risk at a level of 24.55%.  The Wall Street sector is the higher risk sector at 83.78% bullish.

DOW JONES CORPORATE BOND:  This chart continues to be in a column of column of O’s on the long term chart.  It remains on a buy signal suggesting higher bond prices (lower corporate interest rates).  This chart gave a long term buy signal (lower rates) in December 2008.  In October it gave it first sell signal by reversing into a column of X’s suggesting higher interest rates.  That was at a time when investors were “de-risking” and stocks and corporate bonds were being sold.  In November 2011, this chart gave a buy signal and remains there today. 

RELATIVE STRENGTH:  Nothing new here.  We have Domestic Equities in the #1 spot followed by Commodities, Fixed Income, International Equities, Currencies and Cash in last place.  The chart suggests Domestic Equities as the best place to be at this time.

Please give me a call with any questions.

The markets never act the same as we shift between offense and defense.  In August 2011 when we went to defense, we had 52% of the NYSE stocks on buy signals.  Before we found traction, we had declined to a level of 18% bullish in October.  Last year we went to defense on March 10 and then quickly moved back to offense on April 5.  We then stayed on offense until May 16 and then the sellers really started pushing the indexes down.  We don’t know and won’t know what will happen this time but this shift to defense does give you an opportunity assess your risk and goals.  Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach remains in a column of O’s suggesting high risk.  I have discussed in the past some of the strategies that can be appropriate at this time.  The current risk level is 67.57%.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator has gone coast to coast from 88% in February to a low of 26% this month.  We have reversed back into a column of X’s and have broken a double top which is a bullish short term sign.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks is one of the few major indicators that has stayed on offense.  It hit a high of 56% and currently rests at a level of 52.65%.  It would take a move to 50% (6% net new sell signals) to reverse back to defense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator remains on a sell signal suggesting short term caution for OTC stocks.  I know it is frustrating when you see all the different signals that are being given but that is usually the case when we have the main coach on defense.  You don’t get consensus.  Caution short term.

SECTOR DISTRIBUTION CHART: 

The majority of the moves this week were lower.  There were 11 sectors that declined.  We have half of our sectors on offense and half on defense and the average risk is now at 58.01%.  Just a few short weeks ago everybody was happy and all 40 sectors were in demand.  

DOW JONES CORPORATE BOND INDEX:  This indicator follows corporate bonds and show trends for interest rates.  On March 14 we went from a column of X’s (bond prices rising, rates dropping) to a column of O’s (bond prices dropping, rates increasing).  We remain at the same level today.  The short term chart has moved between a column of O’ and X’s four times since March so no real trend is developing.

RELATIVE STRENGTH:  The ranking’s remain the same.  They are as follows:  Domestic Equities, Commodities, Fixed Income, International Equities Currencies, and Cash.  Fixed Income and International Equities are neck and neck at this time.  Each of the asset classes are also passing the Cash Bogey check so cash has the lowest relative strength. 

Let me know if you have any questions.  I will be in Minneapolis on Monday and Tuesday for an advisors conference sponsored by RBC Capital.  Heather and Erica will hold down the fort during my absence.

The reason for raising cash is the “risk” level for stocks has increased.  This is evidenced by the reversal of the NYSE Bullish Percent to a column of O’s and dropping below 70% bullish.  This is considered a “bear alert” status.  Notice is it not “bear confirmed”, just bear alert.  Since December 6 we have had the NYSE BP on “offense” and the demand for stocks has driven them higher.  We have seen every major US equity index enjoy positive returns since the offensive team came on the field.  With elevated risk in the markets, we need to consider more conservative strategies until we again get a change in demand.  Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach has moved from offense to defense.  The NYSE BP has declined to a level of 67.63%.  Defense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator had been on defense.  After the sell off earlier this week it declined to a low risk level of 25.77%.  It has subsequently reversed back to a column of X’s signalling a trading move.  These trading moves can be played with sell stop orders in place. 

OTC BULLISH PERCENT:  The main coach for OTC stocks is still on offense.  The current risk level is 52.90%.  The risk level for this indicator has not gotten to 70% since March 2004.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator had also been on a sell signal.  It declined to a level of 36% before reversing back to a column of X’s.  It remains on a sell signal at this time.

SECTOR DISTRIBUTION CHART:  click image

The number of sectors in a column of X’s has declined this past week.  We had 17 sectors move lower and no sectors moved higher.  The four lowest sectors are Precious Metals, Metals (non ferrous), Steel and Oil.  Wall Street is the highest risk sector at 92% bullish.  We may see some additional sector rotation.  Current risk level is 57.87%

DOW JONES CORPORATE BOND INDEX:  Long term chart still in a column of O’s. The short term chart is in a column of O’s but holding support.  We will see what the next couple of weeks bring for bonds.

RELATIVE STRENGTH:  No change in the ranking this week.  They are as follows: Domestic Stocks, Commodities, Fixed Income, International Equities, Foreign Currencies and Cash. Domestic Equities has been in control since October 24, 2011.  Stay tuned for further changes. 

Have a great weekend.  You are welcome to call or email me to visit about specific strategies.

On Tuesday April 10, we had the NYSE Bullish Percent (the main coach) reverse to a column of O’s showing more stocks giving point and figure sell signals and effectively bringing the defensive team on the field.  This chart is now at a level of 67.67%, breaking below 70%.  For several weeks we have discussed the “risk” level when the NYSE BP is above 70% bullish. To help people understand the bullish percent charts we use the analogy of a football team.  We have effectively fumbled the ball.  As you know, it is difficult to score points in football unless you have possession of the ball. 

Each time one of these events happens it usually plays out different than it did the time before.  The short term indicator like the NYSE 10 Week Indicator has now reached a low risk level of 25.77% (below 30%).  A reversal up from this level would be a “bull alert” trading signal.  The OTC 10 Week Indicator hit 34.23% so this too has reached a low risk level for taking advantage of trading opportunities at lower stock prices. 

In addition to a reversal down for the NYSE Bullish Percent, we also had a reversal down in the S&P 500 Bullish Percent and the Optional Bullish Percent.  The OTC Bullish Percent managed to stay in a column of X’s. 

Here is a look at the Sector Distribution Chart as of April 10.   You will notice several sectors have reversed to a column of O’s showing supply in control again.

It is normal to get a snap back in the indexes after a sell off.  Will we now get a higher level of worry like we saw the past two summers?  We are now back into the process of bottoming and rebuilding into a longer term bull market.  This may take months. 

Please give me a call with any questions.

It is interesting to look at the first quarter of 2012 and review the stock market performance of some of the index ETFs.  The best performing major market ETF was the Powershares QQQ Trust (QQQ).  This index was up 20.99% for the quarter.  That is a good year!  In spite of this great quarter, this ETF is still 76.61% away from it’s all time high.  The iShares MidCap 400 Index (IJH) gained 13.25% for the quarter and this ETF is just .57% away from the all time high.  The SPDR Dow Jones Industrial Average ETF (DIA) gained 8.17% for the quarter and is now just 7.09% away from it’s all time high.  When you compare these three ETFs you can see why there can be such a variance in individual performance when it comes to stock market investments. 

I have been commenting for the past several weeks on the heightened risk level of the stock market now that the NYSE Bullish Percent has reached the 70% level.  This tells us that 70% of the stocks that trade on the NYSE are on point and figure buy signals.  This does not predict what could or will happen to the Dow or any index for that matter.  We have seen the Bullish Percent Charts reverse down for the World BP, the Europe BP and the Asia BP.  The NYSE BP is still in a column of X’s.  I have attached a copy of the NYSE Bullish Percent chart.  (Notice the level the 70% level was the turning point in April 2010 and April 2011.)  Will 2012 also result in a turn in April?  We won’t know for sometime if this is going to happen but you can see how the “red zone” area represents high risk and the “green zone” (below 30% bullish) represents low risk.  When we are below 30% bullish all the sellers that are going to sell have sold.  The numbers on the chart represent months (4=April).  Let me know if you have any questions on using this chart.  Click image below.

Before I cover the Technical Indicators this week I want to share with you another example of “fundamental research” not working as the only source for stock information.  The stock is Best Buy (BBY).  This has been on a relative strength sell signal versus the Equally Weighted S&P 500 since December 2010–one more reason to be suspicious of the stock.  A research firm down graded the stock to a “sell” this week.  When did the fundamental analyst finally recognize what all the buyers and sellers already knew and had acted on?  Maybe this would be a good stock to bottom fish as you wait for management to figure out a turn around?  When will the fundamental analyst decide this stock is again a “buy”?  Click image.

Here are the indicators this week:
NYSE BULLISH PERCENT:  The main coach did decline some this week but not enough to get a reversal to defense.  We remain on offense at a level of 73.82% which is positive but we also keep alert to changes as the risk level is high.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator broke a double bottom this week and closed at a level of 52.19%.  This has been on a sell signal (below 70%) so caution is recommended short term.

OTC BULLISH PERCENT:  The main coach for OTC stocks remain on offense as well.  It is now at a level of 55.59%. 

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator also broke a double bottom and declined to a level of 50.24%.  Defense.

SECTOR DISTRIBUTION CHART:  Click image

Not much change since last week.  We still have 8 sectors on defense.  Precious Metals got hit hard this past week.  If you remember, this sector was already on defense.  The average risk is now at 62.25%.

DOW JONES CORPORATE BOND INDEX:  This chart is unchanged this week.  The long term chart is in a column of O’s but on a buy signal.  The short term chart is in a column of X’s but on a sell signal.  In general, the risk is increasing for treasury bonds. 

RELATIVE STRENGTH:  We remain in the same order as last week. The line up is follows;  Domestic Equities, Commodities, Fixed Income, International Equities, Currencies, and Cash.

Let me know if you have any questions.  Have a blessed Easter.

This is one of those years where the indexes are generally doing well but it is a different story when you look under the surface.  Since December we have seen financial stocks rebound and precious metals stocks decline.  Of course the “noise” or talk about financial stocks has been increasing and the talk about $2000 gold has declined.  I have attached a chart that gives you a good look at this divergence.  (Click image)

I recently read “19 Bold Economic Predictions for the Decades Ahead.”  This was produced by the World Future Society.  I will share some of their predictions over the next few weeks.  Here are the first four.

1.  Shift in economic growth: China, India, Indonesia, South Korea and Russia will be responsible for over half of the global economic growth by 2025.

2. Costly grain:  Prices for staple grains (food) will increase by 120%-180% in the next two decades, by 2030.

3.  Cuckoo for cocoa:  There may be a major cocoa shortage by 2020.

4.  A currency basket:  The world will no longer rely on a single reserve currency by 2025.

As we look at our technical indicator we are not seeing much in the way of change at this time.  The Main Coaches are continuing to suggest offense.  The short term indicators are suggesting caution and so we continue to watch these technical indicators for any new changes in demand.  Here are the technical indicators for this week.

NYSE BULLISH PERCENT:  The main coach for NYSE stocks remains in a column of X’s and demand continues to control this indicator.  We have been in a column of X’s since early December and we have been above 70% bullish since February.  Reaching the 70% level put us in the “high risk” category.  Offensive at this time.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is back in a column of O’s at 62.73%.  The move below 70% put this in a “yellow flashing light” status.  Maybe set some sell stop orders, consider selling some partial positions, begin to look for ways to have buying power should we get a better opportunity. 

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on offense as well.  The NASDAQ market is at multi year highs but with only 56% of the OTC stocks on buy signals.  This shows the impact that “cap weighting” can have on an index.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE: This short term indicator for OTC stocks did manage to reverse back into a column of X’s reaching 61.23%.  This indicator is still below 70% and peaked at a level of 82.28% in early February.  Caution.

SECTOR BULLISH PERCENT CHART:  Click Image 

You can see that we have fewer sectors in a column of X’s this week.  We have 8 sectors in a column of O’s and Oil stocks have declined to a level of 30% bullish.  The commodity driven sectors like Precious Metals, Oil, Oil Service, and Steel seem to be the sectors beling sold. 

DOW JONES CORPORATE BOND INDEX:  The longer term chart remains in a column of O’s suggesting caution.  The short term chart did move back into a column of X’s but remains on a sell signal.  If the markets pull back as suggested by the short term indicators we may see money flow back into bonds short term.

RELATIVE STRENGTH:  The order of relative strength remains the same as last week.  We continue to see International Equities gaining on the number 3 spot held by Fixed Income.  Here is the current order:  Domestic Equities, Commodities, Fixed Income, International Equities, Foreign Currencies and Cash in last place. 

Call or email me with any questions.

NYSE BULLISH PERCENT:  The main coach is staying pretty steady with 75.64% of the NYSE stocks on buy signals.  We can’t seem to make any new progress.  As we get new stocks on buy signals we lose just as many stocks to sell signals.  This suggests the markets are getting a bit tired yet we remain on offense but at high risk levels.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is back in a column of O’s at a level of 65.52%.  This short term indicator making a lower high is suggesting more caution.  This lower high is equivalent to a flashing yellow light.  When you see a yellow light you slow down but you don’t need to stop.  This suggests you slow down and review your equity positions and then proceed forward with caution and a plan.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on offense at a level of 55.86%.  The percent of OTC stocks on buy signals has not been able to get as high as the NYSE.   The one big OTC stock, Apple (AAPL), which makes up over 15% of the Nasdaq 100 (QQQ) gets just one vote in the bullish percent charts so the cap weighting does not impact the percent of buy signals.  I wonder what level the Dow would be at if Apple was part of that index.  Offense.

OTC % ABOVE 10 WEEK MOVING INDICATOR:  This short term indicator remains in a column of X’s at this time.  The current reading is 62.59%.  A reversal to O’s happens at 60%. 

SECTOR DISTRIBUTION CHART:  Click Image

We had 12 sector charts move higher and one sector moved lower.  There are 36 sectors in a column of X’s and 4 sectors on defense.  This chart now has an average risk of 63.67%.  As we move to the right side, the percent of sectors with stocks on buy signals is increasing so caution is warranted the higher above 70% you get.

DOW JONES CORPORATE BOND INDEX:  As we discussed last week, this chart was starting to break down.  The long term chart has versed to a column of O’s and the short term chart had broken a double bottom giving a trading sell signal.  We remain pretty much the same this week.  We will see if the next week can slow down the selling of bonds or if this is a new trend. Stay tuned for further updates.

RELATIVE STRENGTH:  We remain with Domestic Stocks in the #1 position followed by Commodities, Fixed Income, International Equities, Currencies and Fixed Income.  The trend is improving for Domestic Equities and International Equities and declining for Commodities and Fixed Income.  In fact, International Equities are close to over taking Fixed Income based on relative strength which is showing less demand for bonds and more demand for international equities.

Let me know if you have any questions.  You can call or email.

The news this week is interest rates.  The interest rates on long term treasuries moved to the highest level since October 2011.  We saw sell signals in the 30 Year Treasury Yield Chart (TYX) and the 10 Year Treasury Yield Chart (TNX).  The Barclay’s Aggregate Bond Index (AGG) also broke the bullish trend line suggesting a change in trend for this index.  The trend has been lower, now the trend is for higher rates.  These charts represent the mentality of ”risk off” trades.  These assets are what people buy when they want to take risk out of their portfolios.  These sells signals could signal people’s willingness to take on more risk by selling bonds and buying stocks or other asset classes.  The reason people are selling bonds is not relevant.  The sell signals are suggesting rates are moving higher.  I will comment further under the Dow Jones Corporate Bond Index below.  Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach for NYSE stocks remains on offense at a level of 74.74%.  This reached the 70% level in early February.  It reached 76% on February 17.  It has been close to a month and we have not been able to get higher than 76% bullish.  The indexes have moved higher but with fewer stocks on buy signals.  On average we stay above 70% for 96 days.  If the average plays out this year that would take us into May.  Will the seasonality of stocks work again this year?  When buying stocks at these levels it would be prudent for traders to set sell stop orders. 

NYSE %ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator moved back into a column of X’s after dipping below 70% and giving a short term sell signal.  The move back to a column of X’s took us to a level of 75.70% during the week and we ended Wednesday at a level of 69.46%. 

OTC BULLISH PERCENT:  The main coach for OTC stocks remains in a column of X’s as well.  We are at 54.45% bullish.  The NASDAQ market got above 3,000 for the first time since December 2000 but it did it with slightly more than half of the NASDAQ stocks on buy signals.  This suggest just a few OTC stocks are carrying the weight of the index. 

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator also managed to get back into a column of X’s but has since declined to a level of 64.27%, still below 70%. 

SECTOR DISTRIBUTION CHART:  Click image

You can see we continue to be stacked up toward the right side of the chart.  We had sectors move higher.  We still have 35 sectors in a column of X’s.  Those sectors in a column of O’s are Chemicals, Gaming, Machinery and Tools, Precious Metals, and Steel/Iron.  The Aerospace/Airline sector is close to reversing back to a column of O’s as well.  The average risk is at 62.52%

DOW JONES CORPORATE BOND INDEX:  As mentioned earlier, the “risk off” trade suggests more demand for government bonds and less demand for other bonds such as corporate bonds.  We are now seeing a “risk on” trade where there is demand for riskier investments.  Based on relative strength, we have the High Yield Corporate Bonds (HYG) in first place in the bond category.  This suggests people are becoming more confident of corporate profits or just willing to take on more risk because the yield on “risk free” treasuries are so low.  Or maybe they read the Atlantic magazine article and are convinced the economy has been saved.  As of yesterday the long term Dow Jones Corporate Bond Index moved into a column of O’s and the short term chart broke a double bottom giving a short term sell signal for bonds. This change in our charts suggests the wind, which has been at our backs on bonds, is now shifting to more of a light head wind. 

RELATIVE STRENGTH:  Domestic Stocks remain in the number 1 position this week.  The second place asset class is Commodities.  Number three is Fixed Income.  It will be interesting to see if this group can hold their #3 spot.  The number 4 spot has been claimed by International Equities.  They surpassed Foreign Currencies which is now at #5 and bringing up the tail is Cash. 

Please let me know if you want to learn more about these indicators or if you have specific questions.  Thanks for your interest.

NYSE BULLISH PERCENT:  The main coach for NYSE stocks did decline some this past week but it remains on offense.  The current reading is 74.05%.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator went to defense as it broke through the 70% level.  We now have 58.60% of the NYSE stocks trading above their 50 day moving average.  This indicator reached a high of 88.45% in February and hit a level of 53.43% on March 6.  Defense short term.  Remember, these indicators are for trading moves.

OTC BULLISH PERCENT:  The main coach for OTC stock is at 53.67% so this remains on offense as well.  We will have to see if the reversal down in the NDX (Nasdaq non financial) will carry forward to the OTC Bullish Percent.

SECTOR BULLISH PERCENT CHART: Click Image

There are a few changes in this chart as we now have five sectors in a column of O’s or defense.  The average risk has declined to 61.57%.  As sectors reverse down from above 70% it is showing that stocks within those sectors are giving point and figure sell signals.  We may start to see more sector rotation as we approach the end of the first quarter.

DOW JONES CORPORATE BOND INDEX:  The index remains in a column of X’s on both the long term and the short term chart suggesting higher corporate bond prices and lower corporate bond interest rates.  The low rates on treasuries continue to push investors to higher yielding corporate bonds.

RELATIVE STRENGTH:  We continue to have Domestic Equities in the #1 spot for relative strength followed by Commodities in #2.  The next three asset classes are pretty close together–they are as follows Currencies, Fixed Income and International Equities.  It was finally on January 23, 2011 when the Foreign Equities finally passed the Cash Bogey check.  International Equities have slowly been gaining relative strength but they clearly trail Domestic Equities.  International Equities moved into the #4 spot back on August 8, 2011.  Cash brings up the last place for relative strength.

Let me know if you have any questions.  These sell signals in the short term charts change the picture for traders.  The longer term indicators remain on offense so we keep moving forward.

If you don’t like volatility of gas prices you could always hedge the price of the gasoline you are going to be using in the future by buying the US Gasoline Fund ETF.  (Chart below).

This ETF is designed to follow the unleaded gasoline price in relation to changes in the unleaded gasoline futures.  If you own this ETF and gasoline prices rise at the pump this ETF will rise in value at approximately the rate of gasoline prices.  If you are going to drive 15,000 miles this next year and you average 15 miles to a gallon you will burn 1000 gallons of gasoline.  At today’s prices of $3.50 a gallon you will spend $3,500 on fuel expenses.  You can hedge the cost of that fuel by owning the US Gasoline Fund ETF.  As I write this, the US Gasoline ETF (UGA) is priced at $56 so you would need to buy 62 shares of the ETF to effectively hedge the 1000 gallons of gasoline you will use.  If the gasoline prices drop, your ETF will lose value but you will be spending less at the pump.  If gas prices go to $5 a gallon, as is being suggested by some, this investment in UGA will realize a capital gain to offset those higher gasoline prices.

Here are the technical indicators this week.

NYSE BULLISH PERCENT:  The main coach remains on offense and as we have indicated in the past, we are above the 70%, now at 76.85% so caution is warranted.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator has been in a column of O’s for a few weeks.  This is still on a buy signal but also suggesting caution short term.  We are now at a level of 73.35%.  A move below 70% would be a short term sell signal.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on offense at a level of 55.01%.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator (like the NYSE 10 Week) is also in a column of O’s and suggesting caution.  The current risk level is 68.8%.

SECTOR DISTRIBUTION CHART: Click image

This is a picture of an chart that has shifted the risk from low risk in October to higher risk at the end of February.  This however does not suggest that prices have to decline but rather it helps you “see” how today we have many favored sectors and the “risk” in stocks is higher than it was in October through December.  We had 18 sectors move higher this week with 39 sectors in a column of X’s.

DOW JONES CORPORATE BOND INDEX:  Like a broken record, the story is the same here.  The short term chart did reverse back into a column of X’s this week so the trend is for lower bond yields, higher bond prices.

RELATIVE STRENGTH: More adjustments this week. First place is clearly held by Domestic Equities.  In the past week we did have Commodities move to the #2 position and Commondities are also beating the Cash Bogey.  Third place is now held by Fixed Income, fourth place by Foreign Currencies, and fifth place is International Equities and Cash is in last place

Let me know if you have any questions on this indicators.

We are starting to see crude oil getting all the talk on Wall Street.  The upward pressure seems to be coming from Iran’s decision to cut off oil sales to the U.K. and France as well as the bail out plan in Greece.  We will soon be told that gas prices are climbing higher because of the seasonal change in gas blends.  I have attached a long term chart of the Crude Oil.  This chart just broke major resistance at the $102 dollar a barrel price.  I’m sure the last thing the sitting President wants is gas prices at $4 plus a gallon before the election so we will see what tricks will be played out over this year to bring down oil prices.  I have attached another chart showing the impacts on GDP as gas prices rise.  Gas at $4.50 a gallon will have a 1% hit on GDP something else that won’t bode well in an election year.

Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach continues on offense.  I have commented in the past about the momentum behind this market.  It continues to suggest this stock market move has some legs.  The NYSE BP is at a level of 76.61% and no sign of a down turn.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is still in a column of O’s suggesting caution.  The current reading is 81.43%.  This is still on offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks is on offense as well.  The reading this week is 54.52% with slightly more than half of the OTC stocks on buy signals.

OTC % ABOVE 10 WEEK MOVING AVERAGE: This short term chart is in a column of O’s at a level of 75.15%. This is still on a buy signal as well.  It would take a move below 70% to give a sell signal.

SECTOR DISTRIBUTION CHART:  Click Image

You can see the number of sectors in green (favored) and in a column of X’s (capital letters).  This is a bullish chart but as we have discussed, the risk has gone from low risk last October to high risk today.  We can remain in a high risk market for many more Dow points.  When we start to see sectors sell off, then we will know that Wall Street’s appetite for stocks will have changed.

DOW JONES CORPORATE BOND INDEX:  This chart is still in a column of X’s long term (strong demand for corporate bonds).  The short term chart has now reversed into a column of O’s but at this point we wait for further confirmation of a change in trend.

RELATIVE STRENGTH:  We are seeing some changes.  We continue with Domestic Stocks in the number one place, where they have been for some time.  After that we have a horse race going on with Fixed Income, Foreign Currencies, and Commondities.  They are neck and neck at this point.  Bringing up the tail is International Equities and Cash.  We are seeing more improvement in International Equities but not enough to move up in rank.  Relative Strength shows the demand and can help you determine which asset classes to overweight.

Call with questions.

Occasionally we see a divergence in the stock markets or indexes.  Here is an example.  The Nasdaq Market (NDX) hit a new 11 year high recently.  With that being the case you would expect to have many OTC stocks on buy signals.  Instead what we find is that only 53.85% of the OTC stocks are on point and figure buy signals.  The suggests to me there are a few OTC stocks that are making up the bulk of the gains in the NDX.  Could it be Apple (AAPL) which gained 40% in the past year?  It will take many more Apple type of stocks to get the NDX from it’s current 11 year high level of 2800 to the previous high 4800 in March 2000. 

Here are the technical indicators this week.

NYSE BULLISH PERCENT:  The main coach continues in a column of X’s at this time.  There is no sign of a reversal.  The current reading is 75.08%.  This is the highest reading since January 2011 when we hit 80%.  It suggest offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator has reversed to a column of O’s this week.  This is a short term negative.  It remains above 70% so still on a buy signal.  The current reading is 79.37%.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on offense as well.  The reading of 53.85%.  In January 2011 when the NYSE BP peaked, the OTC BP was at a level of 60%.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator, like the NYSE 10 Week, moved back into a column of O’s this week.  It is as 75.94% so still on a buy signal but also a reason to be short term cautious.

SECTOR DISTRIBUTION CHART:  Click Image

You get a better perspective of how the “risk” has increased when you look at each of the individual sectors to see what percent of the stocks in each sector are on buy signals.  Go back and look at previous blogs to see the shift to the right side of the chart.  The current risk level is 61.53%.  The September 30 risk level was 22.95%.  We had the Gaming Sector reverse to a column of O’s.  The only other sector on defense is Gas Utilities at a level of 68%.  We had 25 sectors move higher this past week.  Should we start to see these sectors give sell signals, it will be a sign to become more defensive.

DOW JONES CORPORATE BOND INDEX:  No change here.  Both short term and long term charts on in a column of X’s and offense.

RELATIVE STRENGTH CHART:  The ranking’s remain the same:  Domestic Equities, Foreign Currencies, Commodities, Fixed Income, International Equities followed by Cash in last place.  We continue to see the International Equities gain relative strength versus the other asset classes but not enough to move higher in rank.  This chart continues to suggest investors over weight Domestic Equities in their tactical asset allocations. 

Let me know if you have any questions at this time.  Let me know if there is anything you would like me to comment on in this blog.

Doesn’t the market feel better than last fall?  We have seen the volatility, as represented by the CBOE Volatility Index (VIX), decline from a level of 48% in August to recent level of 16.50%.  This is the same level we had reached in June 2011 before we saw the increase in volatility in July.  We will have to see how this plays out.  Low volatility brings optimism.

We continue to have the offensive team on the field.  The indicators continue to guide us as we watch supply and demand.  The magazine covers continue to be bearish so that bodes well for stocks at this time.  I have attached a list showing the number of days that NYSE Bullish Percent remains on offense once we hit the 70% Bullish Percent Level.  At this 70% level we are “high risk” but still on offense.

Here are the indicators we follow.

NYSE BULLISH PERCENT:  The main coach is still on offense.  It reached a level of 74.47%.  We are in high risk territory so we become more alert to changes and risk.  This level does not mean a decline is imminent.  It is measuring risk. 

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term chart will be more responsive than the NYSE BP.  It is currently at a level of 86.89%.  This means 86% of the NYSE stocks are trading above their 50 day moving average.  Should this break below 70% it would trigger a short term sell signal.

OTC BULLISH PERCENT:  The main coach for OTC stocks continues on offense as well.  We are at 52.39% bullish and no sign of a decline. 

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator increased to a level of 82.28%.  This is the highest level we have been at since May 2009 when we hit 88%.  That of course was right after the big sell off in March 2009.  Watch for a break below 70% for a sell signal.

SECTOR BULLISH PERCENT CHART:  Click Image

The average risk has now increased to a level of 60.71%.  The risk has increased from a level of 41.97% where we were when the NYSE Bullish Percent went to offense in December.  As more industries reach the 70% plus level the risk increases and more defensive strategies can and should be taken.  How each person responds to this risk is independent of their own unique situation.

DOW JONES CORPORATE BOND INDEX:  No changes with both short term and long term charts on offense and in a column of X’s (higher bond prices).

RELATIVE STRENGTH:  We saw International Equities over take Cash in the Relative Strength order on February 3.  The current order is:   Domestic Equities, Foreign Currencies, Commodities, Fixed Income, International Equities and then Cash.  Commodities are still failing the Cash Bogey check so caution is recommended there. 

We continue to have several factors supporting equity prices.  We can find many reasons why stock prices should not be at these levels but that is why we use the charts to help us understand why the collective wisdom of all investors is superior to our opinions or the opinions of anybody else. 

Call or email me any questions.

There are different death crosses such as a 20 day or 15 day moving average.  Back on December 31, 2011 there was a death cross signal given for gold and the media suggested that prices would likely decline.  On January 3, 2012 the GLD (gold) chart reversed back into a column of X’s suggesting demand at $156 and GLD hit $170 this week in spite of the death cross signal.  As you see these signals do not always work.  Price (supply and demand) does not predict prices but supply and demand can not stay wrong.  Price reflects reality not what should be.

I am on a roll this week so I will also comment on the Positive Trend Chart.  This is a long term chart that helps visualize what is going on behind the curtain.  A stock that is trading above it’s bullish trend line is in a positive trend.  When over 50% of the NYSE stocks are trading below their bullish trend line the market is bearish.  We broke below 50% bullish in August 2011.  We finally reversed back to a column of X’s on October 14, 2011 at 34% bullish.  We hit 50% bullish in October but could not get any more NYSE stocks to move to a positive trend until January 2012 (new demand).  We are now at 60% bullish and this chart does not usually top out until it gets to the 80% bullish level.  More evidence that demand is in control.

NYSE BULLISH PERCENT:  The main coach has once again reached the 70% level.  We have not been here since May 16, 2011 when we broke below 70%.  We are still on offense but we now get a bit more cautious with new positions.  We should consider sell stop orders or even selling covered calls on partial positions but there is no reason to become bearish just because we are at 70%, especially with the fed providing liquidity.  Offense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is now at 85.54% so clearly on the short term we are extended.  Unfortunately this indicator won’t predict what happens next but a move below 70% would give us a short term sell signal which traders will want to react to.  Offense.

OTC BULLISH PERCENT:  The main coach for OTC stocks is now at 49.01% so we still have less than half the OTC stocks on buy signals.  Offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator at a level of 79.26%.  This is the highest level we have reached since May 2009.  That date is a good example of how this short term chart moves around.  The NYSE BP had gone to offense in March 2009 so we were just getting started with a great year for stocks but this short term chart gave several trading sell signals during 2009 while the NYSE continued higher.  We will now watch for a break below 70%.

SECTOR BULLISH  PERCENT CHART: click image

We had 30 sectors change over this past week.  Every sector is in a column of X’s or demand.  The average risk has moved to a level of 57.47%.  The risk is higher now than it was but it is still not as high as we typically see while in a bullish trend.  I like to save these charts and then use them to look back to see what the market “looked like” at certain times.  I kept the one I sent out on March 10, 2009 as a reminder of how bearish the mood.  At that time, every Sector was below 30% bullish which is a very low risk market and buying when the risk is low makes sense.

DOW JONES CORPORATE BOND INDEX:  No changes here, still bullish for corporate bonds both short term and longer term.

RELATIVE STRENGTH:  No changes here either.  We have the assets classes in the same rank.  Remember we did have International Equities beat the Cash Bogey a couple of weeks ago so that is positive but on a relative strength basis, Domestic Equities still rule.

Drop me an email or call with any questions.  If you know someone that wants to subscribe to this blog send them to blog.alerussecurities.com.  Happy Ground Hogs Day.

In a recent article, Neel Kaskari of Pimco Funds, laid out a number of possible outcomes:  Austerity and Deflation, Explicit Deflation, Mild Inflation, Runaway Inflation and Miraculous Growth.  Our current state of affairs is chaotic and I could find opinions and facts to support any one of the above events.  It is not normal to have discussions that involve both inflation and deflation as possibilities.  Trying to construct a “strategic asset allocation model” to cover all those scenarios is pretty difficult.  It might be better to just go with the flow and invest where there is relative strength. 

You will see from the indicators this week that the risk has continued to climb since we went on offense on December 6.  The higher risk reading does not predict what could happen.  The higher the risk the more important it is to use sell stop orders on individual stocks.  I have enclosed a long term chart on Netflix (NFLX) to show how stops could protect when the fundamental analysts get it wrong.  The stock remained on a buy signal while it was falling.   The recent buy signal on Jan. 9 was followed by a Merrill Lynch analyst cutting the rating to under perform on Jan. 10.  Chart or analyst, which would you prefer to follow?  (click image)

Here are the indicators this week.

NYSE BULLISH PERCENT:  The main coach is still on offense and moving higher.  Maybe this is forecasting a miraculous growth economy.  The current risk level is 67.80%.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is now at a level of 85.32%.  We have moved to a higher risk level with this indicator but it remains bullish until we break below 70%.

OTC BULLISH PERCENT:  This is the main coach for OTC stocks.  It is on offense and we are seeing more demand for technology and OTC stocks.  That is bullish and the current risk level is 46.93%.  This indicator shows that less than half of the OTC stocks are on buy signals.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is also on offense at a level of 76.36%. 

SECTOR BULLISH PERCENT CHART: Click Image

Another active week with 33 sectors changing.  We have 39 out of the 40 sectors in a column of X’s this week.  You will notice the Precious Metals sector is on a buy alert status from below 30%.  The average risk is now at 53.32%.

 DOW JONES CORPORATE BOND INDEX:  The long term chart remains in a column of X’s and demand.  The short term chart is in a column of O’s suggesting rates might move up a bit.  They had started moving higher last week and then this week the fed comments pushed money back into bonds. 

RELATIVE STRENGTH:  The ranking are the same as last week in this order:  Domestic Equities, Foreign Currencies, Fixed Income, Commodities, Cash and International Equities.  This week International Equities passed the Cash Bogey Check so that is encouraging on the short term.  It does not change the ranking.  International Equities are still in last place.   Commodities are still failing that test but with Precious Metals moving higher that may change quickly.  Commodities are close to over taking fixed income.

Lot’s of cross currents.  Watch the charts for a non biased guide.  Call or email me with any questions.

NYSE BULLISH PERCENT:  The main coach moved higher to a level of 62.59%.  In January 2011 we were at a level of 80% bullish.  Demand is in control.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator reached 80.06% this week.  We are above the 70% level which on the short term is higher risk but we have also seen this short term indicator remain above 70% for long periods of time. 

OTC BULLISH PERCENT:  The main coach for OTC stocks moved back to offense on January 10th and has moved to a level of 43.26%. 

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is on offense at a level of 69.42% and bullish.

SECTOR BULLISH PERCENT CHART:  Click Image

We have moved to a level of 50.70% which is encouraging.  We have five sectors still on defense but demand is increasing each week.  We had 23 sectors move higher.

DOW JONES CORPORATE BOND INDEX:  Demand remains in control of Corporate Bonds.  We have both short term and long term charts on buy signals suggesting higher corporate bond prices and lower corporate bond yields.

RELATIVE STRENGTH:  The positions remain the same this week with Domestic Stocks at #1 and beating the Cash Bogey.  The other assets classes in order of relative strength are Foreign Currencies, Fixed Income both beating the Cash Bogey.  At number four is Commodities which fails the Cash Bogey Check.  Number five position is held by Cash and in last place is International Equities also failing the Cash Bogey check.  Relative strength is a trend following discipline.  You don’t predict, you follow the money.   

You are welcome to give me a call or email me if you want to discuss specific strategies for using these technical indicators.  Thanks for your interest.

Here are the technical indicators this week.  

NYSE BULLISH PERCENT:  The main coach remains on offense at a level of 59.79%.  This suggests that stock prices will move higher. 

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is on offense.  We have moved to a level of 76.75%.  After we move about 70% bullish we enter a higher risk market.  We can remain in high risk levels for extended periods of time. 

OTC BULLISH PERCENT:  On Tuesday the OTC Bullish percent was finally able to garner enough buy signals to reverse back to offense.  This is encouraging as it suggests the demand is broadening to higher risk growth stocks like technology. 

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is at 62.93% bullish.  Offense.

SECTOR BULLISH PERCENT CHART:  Click Image

 We had another active week with 28 sectors moving and 8 of those were reversals up.  We have 32 sectors in a column of X’s and in demand.  The average risk has climbed to a level of 48.13%, still well below the upper 60′s area where we tend to peak.  The Restaurant sector is very close to a reversal.  The Precious Metals sector, at a level of 18.75%, is attractive for those looking to accumulate precious metals at lower prices.  Watch for a reveral to suggest Wall Street wants back in.

DOW JONES CORPORATE BOND INDEX:  The story has not changed here.  Both long term and short term charts are on buy signals suggesting higher bond prices and lower interest rates.  Can they actually go lower?  That is what the chart says at this time so stay tuned.

RELATIVE STRENGTH:  We are getting some traction again in Domestic Equities.  They remain the top relative strength asset class and this week Domestic Equities once again passed the Cash Bogey check so that gives more credence to further advances.  Domestic Equities failed the Cash Bogey check back on the shortened, low volume trading day after Thanksgiving.  This suggested caution as the NYSE BP was also on defense as of November 18.  The other asset classes in order of strength are Currencies (Passes Cash Bogey), Fixed Income (Passes Cash Bogey), Commodities (Fails Cash Bogey), Cash, and International (Fails Cash Bogey).  With the weight of the evidence pointing to Domestic Equities you should asset allocate accordingly. 

Call or email me with any questions.

2011 was a year, like most, where there was a wide range of returns in the best and worst performers.  The best performing broad sectors were Drugs, Gas Utilities, Electric Utilities, Restaurants, and Food.  The worst performing sectors were Metals non ferrous, Steel and Iron, Wall Street, Precious Metals, and Banks.   The best performing major market ETFs were all cap weighted indexes such as the Dow Jones Industrial Average (DIA @ 5.50%), the Powershares QQQ Trust (QQQ @ 2.52%) and the Rydex Russell Top 50 Index (XLG @ 2.02%).  If you owned any non US stocks you likely underperformed these indexes. 

We continue to have the Offensive Team on the field so we expect to make forward progress with stock prices.  Here are the indicators this week. 

NYSE BULLISH PERCENT:  The main coach continues to suggest we play offense.  We moved another box higher to 55.48%.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is in a column of X’s and it broke a double top to give a buy signal.  The current reading is 66.58%.  Offense

OTC BULLISH PERCENT:  This is the main coach for OTC stocks.  It has moved up but not enough to get the reversal to offense.  The current reading is 37.86% and a reversal takes place at 40%. 

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator also broke a double top.  It is in a column of X’s at a level of 52.34%.  Offense.

SECTOR BULLISH PERCENT CHART:  Click Image to Enlarge

There were 12 sectors moving higher this week and only one moved lower.  We now have 24 sectors in a column of X’s.  The average risk has climbed to 44.87% so still far below the beginning of 2011.  Watch for sectors below 30% to start to move showing demand returning.  

DOW JONES CORPORATE BOND INDEX:  This index remains in a column of X’s.  If we start to see sellers of corporate bonds it would get reflected in this index.  No sign of that at this time.

RELATIVE STRENGTH:  We remain in the same positions as last week.  Leading our asset classes is Domestic Equities but it fails the bogey check.  Number 2 place goes to Foreign Currencies, number 3 is Fixed Income, number 4 is Commodities (fails Bogey Check), number 5 is Cash and in last place is International Equities (fails Bogey Check).  We will wait for further developments.

Let me know if you have any questions. 

This year will be remembered for the unprecedented volatility.  It is also a year where large cap stocks started to gain momentum from small and mid cap companies.  We had the relative strength shift from small/mid to large cap in August.  Another sign of the end of the year is the list of the “Top 10 (or 12) Stocks to Buy for 2012″.  I remember in 2008, one of the top stocks to own was Lehman Brothers. Be careful out there.  These journalists need something to grab your attention.  Send me a list and I will give you point and figure charts on the stocks they recommend.  We will see if Wall Street agrees with the journalists. 

We have seen some improvements in the technical indicators this week.  We continue with several indicators on offense but we also have the short term indicators getting whipped around so that is a reason to be cautious.  The trading volume gets very light this time of the year so gains or losses can be exacerbated.   Here are the indicators.

NYSE BULLISH PERCENT:  The main coach is still on offense.  We have a current reading of 52.46%, up slightly.  With this in a column of X’s we look for further advances in stock prices. 

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is getting whipped again.  It is back in a column of O’s so caution.  The current reading is 52.23%.  Each attempt at an advance since October has been followed by a lower high and that is not healthy.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on defense this week.  We have only 36.05% of the OTC stocks on buy signals.  It is hard to get an over all advance without all stocks participating. 

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is currently in a column of X’s but on a sell signal.  Caution.  The OTC High Low did reverse back to X’s this week at 34% so that is an encouraging sign. 

SECTOR DISTRIBUTION CHART:  Click Image

Last week we had 14 sectors in a column of X’s.  This week we increased to 19 sectors.  The average risk is now at 42.48%. The average risk was 69.32% in January 2011 so much less risk now.

RELATIVE STRENGTH:  We saw some slippage here with Commodities dropping to the #4 spot behind Fixed Income.  I wonder if the $40 drop in gold had any impact on that movement?  Domestic Equities are still #1 but still can’t pass the Cash Bogey check.  Foreign Currencies are #2, Fixed Income #3, Commodities #4, Cash # 5 and International Equities #6. 

DOW JONES CORPORATE BOND INDEX:  This index remains in a column of X’s suggesting stronger bond prices.  That suggests competition for investment money to continue going into bonds.

If you would like a copy of the 2012 Global Insights Report emailed to you, send me an email.  This is produced by RBC Capital Markets and it gives a good overview of the economy and things to watch in 2012.  I am looking forward to 2012.  It will be my 25th year in the investment business.  I have seen a lot of changes over that time.  Have a Happy New Year.  See you in 2012.

One of the other charts that is declining is the CBOE Volatility Index (VIX).  As volatility declines the stock market tends to trend higher.  The VIX has declined to a level of 21.47%, the lowest level since last August when the VIX broke out at a level of 22.  We have some changes in our indicators but mostly in the short term charts.  Here is where we sit a this time.

NYSE BULLISH PERCENT:  The main coach remains on offense this week.  This longer term chart shows that 49.89% of the NYSE stocks are on buy signals.  The offensive team is on the field so the charts suggest you accumulate stocks.  The overall risk is not high as represented by only half the socks on buy signals.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is back in a column of X’s and on a double top buy signal.  The current risk level is 55.19% and bullish.

OTC BULLISH PERCENT:  This longer term chart for OTC stocks remains on defense, having reversed to defense on November 23.  This will reverse at a level of 40%.  It sits at 35.01%.  Caution.

OTC % ABOVE 10 WEEK INDICATOR:  This short term chart is also in a column of X’s suggesting demand.  The current risk level is 43.31%.  Now we will see if more buying come into OTC stocks.

SECTOR DISTRIBUTION CHART: Click Image

Another mixed week.  We had 4 sectors rise and 4 decline.  There are 14 sectors in a column of X’s so 26 sectors are on defense or a column of O’s.  Watch for reversals from below 30% for bull alert trading moves. 

RELATIVE STRENGTH:  We continue in the same order as last week:  Domestic Stocks, Currencies, Commodities, Fixed Income, Cash and International Stocks.   The following asset classes failed the Cash Bogey check:  Domestic Equities, Commodities and International Equities.  This is suggesting caution for those groups. 

DOW JONES CORPORATE BOND INDEX:  The DJCORP Chart is still in a column of X’s suggesting demand for corporate bonds.  No sign of a big turn as we sit today.  In fact the average rate on a 30 year fixed mortgage is now 4.08%, the lowest level on record going back to 1990.  

Wishing you a wonderful Christmas this weekend.  I will be in the office to help with any year end tax planning so give me a call.   

I ran across some information on Walmart that I found interesting. Walmart (WMT) has annual revenues of $421 billion. The revenue of other large US companies include Exxon Mobil (XOM) at $354.6 billion, Chevron (CVX) at $196.3 billion, General Electric (GE) at $151.6 billion and Pzizer (PFE) has revenue of $67.8 billion. Did you know that Walmart sells 5 times more than the second largest retailer, Costco (COST). Walmart’s sales are 10 times the sales of the largest on line seller, Amazon (AMZN). Walmart is the largest grocer in America doing $129 billion in grocery sales. That makes Walmart 1.5 times as big as Kroger (KR) and 58 times as big as Whole Foods (WFM).  No wonder that Walmart smiley face is so happy.

This past week we saw some additional slippage in the technical indicators.  Here is a rundown as of December 14.

NYSE BULLISH PERCENT:  The main coach remains in a column of X’ and on offense.  This is an important tool as a longer term indicator.  It is encouraging to see this hold in a column of X’s while the short term is fluctuating.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator remains on defense and in a column of O’s.  It fell further this week to a level of 37.62%.  This could soon be approaching the over sold level below 30%.  Defense.

OTC BULLISH PERCENT:  The main coach for stocks that trade on the Nasdaq remains on defense.  This reversed to defense on November 23 and remains there today.  The Nasdaq non Financial Bullish Percent also went to defense this week.

OTC % ABOVE 10 WEEK INDICATOR:  This short term indicator also declined further this week.  It is in a column of O’s and defense.  The current risk level is 35.83%.

SECTOR DISTRIBUTION CHART:  Click chart

The Sector Distribution chart saw some slippage this week.  We have an average risk of 40.62%.  The Precious Metals sector is down to 18% as we saw gold break down this week.  The Oil and Oil Service stocks also reversed to a column of O’s.  We have 14 sectors still in a column of X’s.  Back on October 28 every sector was in a column of X’s.

RELATIVE STRENGTH UPDATE:   We have Domestic Equities remaining in the #1 spot  but Domestic Equities fails the cash bogey check suggesting caution.  Commodities slipped to the #3 spot behind currencies.  The selling of gold and oil has pushed this lower.  The other asset classes remain at the same levels as last week.

DOW JONES CORPORAT BOND INDEX:    This chart managed to move back into a column of X’s after holding support 3 times.  No sign of interest rates rising at this time.  Should we get a sell signal or change in direction I will alert you.

Please call or email me with any questions.  This is a tricky market where leadership changes quickly.  Be careful.

The month of December is going by quickly and the volatility, although decreasing, continues at unusually high levels.  In 2011 we have had the S&P 500 index correct 10% three different times.  During the time period from 2004 to 2007 we did not have one 10% correction in the S&P 500.

We are seeing further improvements in the technical indicators this week.  The most significant one is the Main Coach, the NYSE Bullish Percent, has again moved back into a column of X’s.  This is showing an increase in the number of stocks on point and figure buy signals.  This suggests that demand for stock is increasing.  This could be because of the seasonality of stock to move higher in December or maybe the institutions are re-balancing portfolios before the end of the year.  Either way, demand is good.  Here are the indicators.

NYSE BULLISH PERCENT:  The main coach moved back into a column of X’s at a level of 50.68%.  We also have the S&P 500 Bullish Percent returning to a column of X’s or demand.

NYSE % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator reversed up on November 28 and we are not at a level of 72.72%.  When we get above 70% we have reached a short term “high risk” level.  We can and have stayed above 70% for extended periods of time.  With the short term indicator at this level it would be appropriate to set sell stop orders on new positions.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains in a column of O’s this week.  We improved this week but not enough to get a reversal.  The current risk level is 36.34%.  It would take a move to 40% bullish to put this indicator back in a column of X’s.

OTC % ABOVE 10 WEEK INDICATOR: This short term indicator also reversed back to offense on November 28.  It has climbed to a risk level of 54.84%.  This indicator has not been at the 70% level since January of this year.

SECTOR DISTRIBUTION CHART:  Click image

We had the majority of the sectors move up this week.  We now have 14 sectors in a column of X’s or demand.  The two highest ranked stocks are Electric and Gas Utilities.  Metals non ferrous has the lowest score.  This tool helps “see” demand and supply shift in the different sectors.  The average risk is now 42.24%.

RELATIVE STENGTH:  The relative strength order remains the same this week.  Domestic Stocks remain in the number one position but Domestic Equities fails the Cash Bogey check suggesting caution.  Currencies and Commodities remain in a neck and neck race for second place.  Currencies pass the Cash Bogey check and Commodities fails the test.  The rest of the asset classes rank as follows: Fixed Income, Cash and International Equities.

DOW JONES CORPORATE BOND INDEX: This chart reversed into a column of O’s on November 21 and we have seen some selling pressure on corporate bonds.  If this chart breaks a level of 110 it would be a spread triple bottom sell signal and that would suggest some defensive action with regard to corporate bonds.  The short term chart had held this support for the third time as well.  This is one to pay attention to.

Give me a call or email me with any questions.

NYSE BULLISH PERCENT: The main coach moved up to 45.91% bullish. This is an increase but not enough to reverse the direction of the chart. We remain in a column of O’s and defense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE: This short term indicator reversed back to a column of X’s on November 28 from a low level of 26% bullish. It closed on Wednesday at a level of 71.79%–back to the high risk level. That is one of the fastest moves I have every seen–from below 30% to above 70% in two days. Never the less, this short term chart is bullish and on offense.

OTC BULLISH PERCENT: The main coach for OTC stocks also remains on defense. We have 34.19% of the OTC stocks on buy signals. It would take a move to 40% bullish to move this back to offense.

OTC % ABOVE 10 WEEK MOVING AVERAGE: This short term indicator also reversed back to a column of X’s on the 28th of November, from a level of 28%. It closed on Wednesday at a level of 53.15%. We went from 34% of the stocks trading above their 50 day average price to over 53% trading above their average price. Impressive.

SECTOR BULLISH PERCENT CHART: Click image

We have a lot of action this week. We had 5 sectors move up and 14 sector charts moved down. We have 6 sectors in a column of X’s with Wall Street moving back to X’s yesterday. If this is the start of a new push to the right we have a lot of room to go. Watch for other reversals back to X’s. On October 31 we had every sector in a column of X’s and then on November 2 we had Wall Street reverse down and many sectors followed. Now on November 30 we had Wall Street reverse back to X’s. Interesting. We have several sectors are low risk levels and the average risk is at 39.02%.

RELATIVE STRENGTH: No change in our ranking this week. Late last week we had the Domestic Equities asset class fail the Cash Bogey check. This is a negative sign and certainly a reason for caution. Currencies keep their number 2 spot and moved a bit higher. The rest of the asset classes are at the same levels as last week: Commodities, Fixed Income, Cash and International Equities in last place.

Please contant me with any questions on the technical indicators.

We continue to have the defensive team on the field and when that is the case, not much good happens for stock prices. The move down has been swift and brutal. We have moved some of our technical indicators down to levels where we might start finding some traction. One chart I follow is the 30 Week Indicator. This is more of an intermediate chart. I usually report on the 10 Week Indicator which is a good tool for the short term movement. The 30 Week Indicator is now at a level of 18.05%. This tells us that 82% of the NYSE stocks are trading below their 150 day moving average. The Weekly Distribution chart puts us at 22% over sold at this time. We were at 50% over sold the last time the offensive team came on the field. Bottom line, defense is in control and we will have to wait for a bottoming process to start again. Here are the indicators.

NYSE BULLISH PERCENT: The main coach fell further to a level of 44.67%. Defense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE: This short term indicator is now at 26.88% so once again below the 30% over sold level. We will wait for a reversal from below this level to give us guidance of demand returning.

OTC BULLISH PERCENT: The indicator reversed to defense this week as well. The current reading is 33.96%.

OTC % ABOVE 10 WEEK MOVING INDICATOR: This short term chart is at 29% bullish so also below 30%.

SECTOR BULLISH PERCENT CHART: Click Image

You can see we have had more sectors more to a column of O’s showing the selling pressure. The average risk has declined to a level of 38.09%.

RELATIVE STRENGTH: We continue to have Domestic Equities in the number one spot this week. This one of the positives for the stock market at this time. Currencies moved back into the #2 position with Commodities close behind. Both Domestic Equities and Currencies past the Cash Bogey check. The remaining asset classes in relative strength order are Fixed Income, Cash and International Equities.

DOW JONES CORPORATE BOND INDEX: The long term chart has moved back into a column of O’s suggesting caution on bonds. The short term chart has also broken a double bottom so we are seeing some selling pressure on corporate bonds. We will see how this plays out.

Enjoy the weekend. Call or email me with any questions.

There are some encouraging signs for stocks as evidence by Domestic Equities being the number 1 ranked asset class and Domestic Equities also passed the Cash Bogey check. The longer term Positive Trends chart remains in a column of X’s as well. On the negative side, the short term indicators are in a column of O’s. The Main Coach has put the defensive team back on the field so we expect further pull backs.

The unknown is whether this pull back will be short lived. As a result, it is best to accept the facts and act accordingly. When we get a change in demand again, then stock prices will reflect that demand. The stock market is likely reflecting the anxiety of the U.S. government’s inability to function effectively.

Wishing you a Happy Thanksgiving.

We are seeing some additional changes in some of our indicators. These indicators can not predict what may happen but they are becoming more cautious in nature. The Percent of Optional Stocks Weekly Momentum chart reversed down from a 92% level. I consider this a secondary indicator but never the less, it reversed down from a high level. This chart reverses up when the 1 week moving average moves above the 5 week moving average and reverses down when the 1 week moving average moves below the 5 week average. These momentum charts tend to stay positive or negative for an average of 7 weeks. As we lose short term momentum we would expect to see short term weakness. We also had the World Bullish Percent Chart, the Optional Bullish Percent Chart and the S&P 500 Bullish Percent chart reverse to a column of O’s so another chink in the armor. The NYSE High Low is a indicator that measures the percent of stocks that make new highs versus new lows. It has also reversed into a column of O’s and has also fallen below 70% which is considered a sell signal. At this point it would appear this pull back is the pause that refreshes as the longer indicators remains positive.  Here are the technical indicators this week:

NYSE BULLISH PERCENT:  The main coach slipped a bit further but remains on offense. It is currently in a column of X’s at a level of 56.02%. The reversal to defense happens at 56%.

NYSE % ABOVE 10 WEEK MOVING AVERAGE: This short term indicator has given two sell signals and is back in a column of O’s. This measures the percent of stocks above their 10 week moving average. Breaks below 70% are considered a sell signal. The current reading is 59.03%.

OTC BULLISH PERCENT:  The main coach for OTC stocks remains on offense this week. The reading is at 39.27% with the recent high at 40.93%.

OTC % ABOVE 10 WEEK MOVING AVERAGE:  This short term indicator is in a column of O’s and has made 2 lower highs. The column of O’s suggests caution. The current level is 48.12%

SECTOR BULLISH PERCENT CHART:  Click image.

We had some movement down this past week. Ten sectors moved lower and one sector, Forest and Paper, moved higher. There are now 29 sectors still in a column of X’s. The average risk is at 45.83%. This is not a high risk area but the risk has certainly gotten higher since the low of 18.04% on October 4.

RELATIVE STRENGTH: In the relative strength charts Domestic Equities remain at number 1. The Commodities moved into number 2 primarily from strength in oil. The currencies slipped to number 3 but they remain very close to Commodities. The remaining 3 assets classes are Fixed Income, Cash and in last place International Equities.

DOW JONES CORPORATE BOND INDEX: The long term chart remains in a column of X’s but the short term chart has moved back into a column of O’s. We will continue to monitor any further developments in this chart. With the long term chart in a column of X’s I would not expect much change in long term rates.

Caution as we move forward. These slips in the technical indicators could be short term or they could be the start of another defensive period. Time will tell.

There was an article in the Wall Street Journal on Saturday Nov. 5 titled “Why Wall Street Can’t Handle the Truth”. The article was written by Mike Mayo and it was a rehash of problems with Wall Street stock research. Mike Mayo works as an analyst and he discusses how few stocks are ever ranked a “sell”. Of the 29,469 stocks with fundamental ratings, only 814 or 3% of the stocks are ranked sell. I have discussed these types of articles in the past. Back in May 2001, Fortune magazine’s cover title was “Can We Ever Trust Wall Street Again?” I have long known that the research we have available today is not particularly effective because the analysts usually don’t know the fundamentals have changed until it is too late. I recently gave the example of Netflix (NFLX). How many analysts were able to advise investors that MF Global was going to go bankrupt? With individual stocks it is important to understand the difficulty of knowing the fundamentals. That is why combining both fundamental research with technical research can improve your success. I would tend to figure the collective wisdom of many (technical picture) is better than the wisdom of a few fundamental analysts.

We continued to make progress with the technical indicators this past week. Wednesday turned out to be a difficult day for the financial markets. On days when the major indexes pull back it may or may not have an impact on the technical indicators. With the bullish percent charts, each stock gets one vote. The indexes can be moved violently yet the bullish percents may not move unless enough stocks individually give buy or sell signals. Here are the indicators this week.

NYSE BULLISH PERCENT: The main coach is still on offense at a level of 60.26%. We did see some pull back but not enough to reverse to defense.

NYSE % ABOVE 10 WEEK MOVING AVERAGE: This short term indicator is now on a sell signal. It reversed to a column of O’s on Wednesday and close at 63.69%. A break below 70% is a sell signal so caution short term.

OTC BULLISH PERCENT: The main coach for OTC stocks remains on offense as well. This indicator is now at a level of 40.55%.

OTC % ABOVE 10 WEEK MOVING AVERAGE: This short term indicator reversed into a column of O’s but remains on a buy signal at this time.

BULLISH PERCENT CHART: Click Image

We had a few sectors mover higher but we also saw some declines. You can see by the chart that we now have 4 sectors in a column of O’s. Last week it was Wall Street and this week we saw reversals in Autos, Steel and Textiles. The average risk is now at 48.19%.

RELATIVE STRENGTH: There is no change in the relative strength charts this week. We continue to have Domestic Stocks in the number 1 position and we have the rest in the same order as last week. Here is the order: Domestic Stocks, Foreign Currencies, Commodities, Fixed Income, Cash and International Equities.

DOW JONES CORPORATE BOND INDEX: This chart continues to show demand for bonds which suggests lower or at least low interest rates staying with us. Stay tuned for future changes as they happen.

The markets will likely continue to trade on Europe’s noise. We are moving into the time of the year when domestic stocks tend to out perform. This might be a good time to turn of CNBC and look at the technical reports for direction. Call or email me any questions.