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Range Bound Indexes

I did not get this comment out last Thursday like I normally do.  Here is a run down of where we are as of Friday March 1, 2013.

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.

 

 

 

 

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