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 !!!

Tuesday, May 01, 2012

Stock Market -- Technical

The stock market has rallied over the past week or so from a mild short term oversold. The 10
and 25 day m/a 's have turned up with the 10 close to crossing the 25 on the way up. Such a cross
would be a good sign short term. To have much credibility, the SPX needs to move up from today's
1406 and take out the 4/2/12 cyclical closing high of 1419.

I have not played this brief rally. After the extended positive run we've had, I was hoping for a
deeper oversold to hedge risk.

The market is now in the middle of a window for an intermediate term cycle low. No dice, yet,
and this is interesting because the the market failed to observe the previous cycle low scheduled
for mid - Jan. 2012. This roughly 75 - 85 trading day cycle had been working like a charm since
at least 2007. Two straight misses would invite a fresher look at cycle behavoir.

The run - up in stocks since late 2011 has brought the market up to a 10.1% premium to its 200
day m/a. There have been over a dozen trips up like this since the latter 1980s. All occurred
in cyclical bull markets. Once the market crosses the 10% premium threshold, the odds have
been running only one in four in favor of a further sharp advance over the succeeding  six months.
The other cases all involve either extended consolidation / mild correction or prelude to a
cyclical bear market.

From my perspective, speculating on a further substantial move up in stocks over the next six
months is an against - the - house bet with an only 25% modern times probability in its favor.
Now, although the positive price momentum has gone out of the market over the past month,
it is still operating on an intermediate term buy signal based on how I smooth out a 200 day
m/a price oscillator. Obviously, if this current minor rally takes out the SPX 1419 level and
continues to move up, that buy signal is likely to remain in force for a while.

Since this current cyclical bull is more than three years old, I am now as likely to go short as I
might go long and I will be most attentive when the market is either + or - 5% its 25 day m/a.

$SPX chart

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