About Me

Retired chief investment officer and former NYSE firm partner with 40 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 !!!

Saturday, October 27, 2012

Stock Market -- Weekly

The daily SPX chart has the market in correction and now the weekly chart has turned
down as well. SPX Weekly I am carrying a link to the daily SPX and its 200 day m/a
price oscillator. SPX + 200 day osc. The drop in the oscillator has been sharp enough to
trigger an intermediate term sell signal for the SPX

The basis for the sell signal does whipsaw on occasion, but when it does it usually happens
quickly. If not,  the market does tend to trend lower. If you stay with the SPX + 200 day osc.
chart, I noted last spring that when the oscillator tops +10%, the odds are only about one in
four that the market can go on to sustain new high ground. This obervation is based on nearly
30 years of data and has served me well. You will note that the SPX has declined back inside
the spring 2012 high of just over 1420 for the SPX. So, from a statistical / technical point
of view, the market has been on shaky ground since the spring spike in the price oscillator.
I need to add here that the significance of the 10% rule on the oscillator does start to fade
somewhat after a six month time period.

My weekly cyclical fundamental indicator (WCFI) has clearly turned down in recent weeks
reflecting an upturn in jobless claims and a reversal for sensitive materials prices. It is
striking that the stock market and industrial commodities prices have weakend since the first
presidential debate when Obama flopped and let Romney back in the race. Now, I think
concern over the resolution of the tax and spending issues embodied in the fiscal cliff issue
were due to bother investors and business confidence as as the deadline for resolution draws
ever more near. The Romney resurgence adds another layer of uncertainty to the fiscal cliff
problem and, as important, puts the future of Fed QE 3 into play given Romney's negative
view of Fed. policy.

If Obama were to win on Nov. 6, the fight over resolution of the fiscal cliff would clarify
and investor / trader worries over the sustainability of QE would also fall away. An
Obama victory could well trigger a relief rally and produce a whipsaw on the new sell
signal.

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