About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Friday, December 09, 2011

Stock Market -- Short Term

Fundamentals
The weekly cyclical directional indicator has been running flat since 10/21/11 following a fairly
sharp downtrend which started the week of 4/15/11. The SPX is up 1.4% since 10/21, and is down
about 8% since its 4/29 cyclical high. The tracking of the SPX to the indicator has not been bad at
at all. The major declining element within the indicator has been the composite of industrial
commodities prices. Note that sensitive materials prices have started to edge up. Going forward,
it might be wise to watch not just sensitive materials prices but new claims for unemployment
insurance as well. The positive mix is rising prices / falling claims. The more purely coincident
indicator within the broader weekly directional has been relatively steady for 2011 and signals
modest broad economic growth.

My core fundamental indicators suggest a continuing "easy money" bull market, but have not been
reliable since mid - 2010 as investors have been far more sensitive to the shorter term direction
of the weekly cyclical diectional indicator which, in turn, has been considerably more volatile
than the broad economy as well as my profits indicators. Among the core indicators, credit
quality yield spreads have worked the best. The heightened sensitivity to credit quality along
with the evident downtrend of the p/e ratio also suggest continuing investor caution about the
future in line with strong player focus on weekly economic and financial data.

Technical
The market has entered another short term uptrend which started in late Nov. The trajectory of
the advance is a little daunting, but the SPX is not yet overbought. To be convincing as more than
a quick pop, the SPX (now 1255) must cruise up to take out resistance points from 1270 through
1285. $SPX Check out the descending tops since the spring and you will see why it is critical
for the market to start attacking resistance soon.

I like to watch the trend of price momentum relative to the 200 day m/a. Development of an
uptrend here is a good sign for longer term direction. SPX & Momentum A positive but as yet
unconvincing bias is developing here as well.

I would be personally more interested in the market if the short term swings in price momentum
were to settle down some from recent levels (Check out the 12 day ROC% in the SPX chart
above). I do not need this much exitement at my tender age.
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The stock market was in cyclical bull cruise control mode until the spring of last year when
sudden but temporary weakness in the weekly economic data shattered the cruise control and
forced taders as well as investors to focus on very short term economic direction and momentum.
A repeat of same this year coupled with uncertainty about the future of the Eurozone has forced
noses down to the short run grindstone and has greatly reduced confidence regarding the visibility
of the future. the data provide no respite for this anxious mentality just yet.

1 comment:

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