A strong day hit a wall.
Why we had a big open on Monday when everyone was dumping stocks before the weekend is interesting to me. It tells me that there are buyers out there but holding stocks over a long weekend was a bit too much to ask during these uncertain times.
The day started out strong and stayed up throughout the day, but looking at an intraday chart of the Dow, it seemed to hit a wall around the 10,525 area. I don't know if this is significant or not, just another interesting observation.
Let's talk about investor sentiment. The AAII Survey showed the percentage of people polled who are bullish was 59%. It hasn't been that high since mid-January when this consolidation period started. If you have been reading these daily comments for any length of time you know that I am a contrarian. The higher the bullish percent, the more bearish I get. The more people say they are bearish (20% in this survey) the more bullish I get.
Charts provided
courtesy of
www.decisionpoint.com
These levels are not extreme, but we may need a little more selling to get these back to a more bullish (in my view, not the pollster's) environment to start a new leg up. The herd is usually wrong at market tops and bottoms. You can see that on or about March 23, there were over 40% bears and only 31% bulls before the market blasted off. Ideally I'd like to see the herd a little more bearish, perhaps a bearish level closer to 30% or 40%, before I get in.
I just read some interesting information regarding the housing market. In the past, when the REIT index drops by at least 10% off its peak, the S&P 500 average fell an average of 12.7% within the next month.
Charts provided
courtesy of
www.decisionpoint.com
Look what has been happening lately (above). It's only happened three other times since 1970 (the S&P fell all three times), so I don't know how significant this data is, but it sure caught my eye. Kind of a yellow flag if you ask me.
I am Currently 100% G fund, waiting on an opportunity to get into the stock funds. See you tomorrow if I don't see you on the message board.
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Highlights from Monday's Comments (see archives on left for full
article):
Since the last earnings season we have seen relatively no move in the indices. We saw a lot of movement, we're just back where we started. On January 16th the S&P 500 closed at 1139.83. Thursday it closed at 1139.32.
If we are going to see a new leg up, perhaps the new earnings reports will be the catalyst. The economy has all but proven itself. So far the early earnings reports have been positive. Interest rates remain low. The problems continue to be in Iraq and the mudslinging in the presidential race hasn't helped. Until we see reason to do otherwise, the way to play this will be to buy when the market pulls back, and sell when the oversold indicators tell us. Currently the market is leaning toward overbought but it has been heading down the last few days. A nice sell off today would help.
Remember today is supposed to be an historically bad day, particularly when the Thursday before Good Friday was down. This historical data hasn't worked out too well for us lately so I won't be too surprised if it's not down. I reprinted that chart at the bottom of the page even though there is not much we can do about it now.
The question is, when do we get back into the stock funds? I am watching the overbought/oversold indicator closely as well as the ARMS index 10 day moving average. Both tell me we still have some weakness ahead. Anything less than .90 on the ARMS indicator is a bearish sign and it is currently .88.
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