Last week's indicator review emphasized a lack of buyer involvement manifesting itself across a diversity of measures. Particularly noteworthy were weakness inward coin flows together with inward the Cumulative NYSE TICK. That lack of involvement translated into farther toll weakness this by week, every bit the S&P 500 Index ($SPX) moved to multi-week lows.
On Friday, nosotros had 402 novel 65-day highs across all NYSE, NASDAQ, together with ASE issues against 360 novel lows (top chart). The latter is the highest compass of novel lows since mid-April. H5N1 like painting exhibit tin forcefulness out live on seen alongside fresh 20-day lows across the exchanges. Fri recorded 642 novel 20-day highs against 1242 novel lows. That is the highest compass of novel 20-day lows since March 20th.
This weakness has hitting a bulk of stock marketplace sectors. Only the loose energy sector of the S&P 500 Index continues to register positive values inward my Technical Strength index of trending. Among the forty stocks inward my basket, evenly drawn from 8 S&P 500 sectors, nosotros accept every bit of Fri vii stocks inward uptrends, 4 neutral, together with 29 inward downtrends. Only 43% of S&P 500 stocks are straight off trading inward a higher identify their 50-day moving averages, downward from 80% at the marketplace peak. Only 29% of those stocks are straight off trading inward a higher identify their 20-day moving averages.
Despite this weakness, nosotros are non withal recording meaning oversold levels inward my Cumulative Demand-Supply Index (middle chart), though the index has been deteriorating for a while. Readings below -20 accept tended to accompany skilful intermediate-term buying opportunities; the electrical flow reading is -4.69.
Money flows for the Dow thirty industrial stocks (bottom chart) rest negative, with the four-day average continuing below the nix line. That agency that to a greater extent than dollars are flowing out of those stocks than coming in. Interestingly, coin flows during the final few days of weakness accept non been every bit negative every bit seen a twosome of weeks ago, only this volition entirely live on an of import constituent for stocks if nosotros commencement to come across divergences inward other measures, such every bit the novel highs/lows.
In all, there's non much to live on excited well-nigh for the bulls. H5N1 hold off at the sectors shows fresh send marketplace lows for banking stocks together with homebuilder shares. These sectors are the equivalent of the tech stocks during the 2000-2003 downturn; it is hard to imagine a sustained bull marketplace with these leading the downside.
RELEVANT POST:
Review of Sector Performance
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Wednesday, June 21, 2006
Thursday, June 15, 2006
Info!! Cross-Talk: Thoughts On Fiscal Planning Inward A Challenging Economy
Reader Tim offers a perceptive reply to my recent post:
It's hard for me to residue what nosotros know close the major subject of regime financial irresponsibility alongside brusk to medium term trends. As you've mentioned, it's i affair to live a successful trader, producing income too roughly other to live financially successful too responsible over the long term. Influenza A virus subtype H5N1 trader should live able to compass income merely what of retirement too all those babe boomers that are going to force their stock investments at the same fourth dimension too foremost looking for income streams? With inflation including world monetization of bad banking concern loans (private debt) where tin you lot operate to larn a hedge too protect assets for the future?
That's actually the challenge of the investor, every bit opposed to the short-term trader: to, every bit best every bit possible, seat scenarios for the future, seat oneself to turn a profit from those (or at to the lowest degree to non lose money), too to live sufficiently hedged inwards the trial i is wrong. Many times this volition hateful acting on scenarios that differ from what you lot run across inwards the short-to-medium term, which--as Tim notes--can live hard to balance.
A pitiable somebody is i who worries close how to pay the bills. Influenza A virus subtype H5N1 optic income somebody is i who worries close funding retirement. Influenza A virus subtype H5N1 wealthy somebody is i who worries close leaving plenty for the side past times side generation. More assets compass non necessarily convey fewer worries, exclusively dissimilar ones. When you lot don't select money, you lot are worried close making it; when you lot select excess capital, you're concerned close keeping it.
"Hope for the best, innovation for the worst" is advice that has served me good every bit a short-term trader. By placing your stop-out level, you lot innovation for the worst number too ensure you lot tin live on it. Similarly, through diversification too hedges you lot tin innovation for the worst every bit an investor too residue your diverse opportunity exposures.
In the final twelvemonth I've traveled inwards the the United States of America from Miami, FL to Bellevue, WA too quite a few places inwards between. The mutual chemical factor has been cranes on the skyline. Building continues apace, fifty-fifty amidst indications of a housing oversupply. New luxury developments trouble the major Naperville street that passes our neighborhood; the houses are non moving, merely to a greater extent than are beingness built.
In i expanse I visited recently, an entire condominium complex is going under. The developer could non sell plenty units too so could non heighten sufficient association fees to properly maintain the development. This led to higher fees for existing tenants too cutbacks inwards services, including lighting inwards hallways. Caught inwards a boot the bucket spiral, electrical flow residents notice they cannot sell their properties for fifty-fifty bargain-basement prices: no i wants the liability of paying fees for a deteriorating facility.
Suppose the housing crises winds upward much deeper too broader than expected. How would this deport upon the economy? How would this deport upon the income of municipalities too their mightiness to pay off debts? How would this impact banks belongings mortgage debt--and how would that deport upon monetary policy at a Fed fearful of disintermediation?
It's non hard to imagine a perfect tempest for babe boomer retirees, inwards which involvement rates kept depression past times an accommodative Fed limit savings income, fifty-fifty every bit residential too stock marketplace holdings are falling inwards value too work opportunities (along alongside the economy) are contracting.
For those concerned close retirement too estate planning, the number is non then much the specific odds that this scenario volition unfold, merely rather how i would rest inwards the game *if* it unfolds. For those distant from their financial goals, the temptation is to larn aggressive too boundary inwards to purchase housing bargains, battered financial stocks, too juicy high-yield debt. I remember, too, when plenty of investors jumped inwards to purchase bruised applied scientific discipline shares subsequently their big drib early on inwards 2000. They seemed similar bargains when they were 25% off their highs...but injure upward to a greater extent than similar 75% off their highs over the side past times side 2 years.
I believe Tim is bespeak the correct enquiry close finding hedges. The tricky role hither is identifying whether the ultimate threat is inflation (and soaring involvement rates too commodity prices) or deflation (and collapsing rates too financial property values). For me personally, it's the prospect of a housing collapse, attendant banking concern crises, too an irresistible force toward quantitative easing at a Fed dominated past times appointees from the side past times side direction that leads me to attempt protection from a possible perfect storm. As a result, locking inwards high character yields too hedging against stock marketplace too dollar weakness has been a dominant role of my increasingly fluid financial planning.
.
It's hard for me to residue what nosotros know close the major subject of regime financial irresponsibility alongside brusk to medium term trends. As you've mentioned, it's i affair to live a successful trader, producing income too roughly other to live financially successful too responsible over the long term. Influenza A virus subtype H5N1 trader should live able to compass income merely what of retirement too all those babe boomers that are going to force their stock investments at the same fourth dimension too foremost looking for income streams? With inflation including world monetization of bad banking concern loans (private debt) where tin you lot operate to larn a hedge too protect assets for the future?
That's actually the challenge of the investor, every bit opposed to the short-term trader: to, every bit best every bit possible, seat scenarios for the future, seat oneself to turn a profit from those (or at to the lowest degree to non lose money), too to live sufficiently hedged inwards the trial i is wrong. Many times this volition hateful acting on scenarios that differ from what you lot run across inwards the short-to-medium term, which--as Tim notes--can live hard to balance.
A pitiable somebody is i who worries close how to pay the bills. Influenza A virus subtype H5N1 optic income somebody is i who worries close funding retirement. Influenza A virus subtype H5N1 wealthy somebody is i who worries close leaving plenty for the side past times side generation. More assets compass non necessarily convey fewer worries, exclusively dissimilar ones. When you lot don't select money, you lot are worried close making it; when you lot select excess capital, you're concerned close keeping it.
"Hope for the best, innovation for the worst" is advice that has served me good every bit a short-term trader. By placing your stop-out level, you lot innovation for the worst number too ensure you lot tin live on it. Similarly, through diversification too hedges you lot tin innovation for the worst every bit an investor too residue your diverse opportunity exposures.
In the final twelvemonth I've traveled inwards the the United States of America from Miami, FL to Bellevue, WA too quite a few places inwards between. The mutual chemical factor has been cranes on the skyline. Building continues apace, fifty-fifty amidst indications of a housing oversupply. New luxury developments trouble the major Naperville street that passes our neighborhood; the houses are non moving, merely to a greater extent than are beingness built.
In i expanse I visited recently, an entire condominium complex is going under. The developer could non sell plenty units too so could non heighten sufficient association fees to properly maintain the development. This led to higher fees for existing tenants too cutbacks inwards services, including lighting inwards hallways. Caught inwards a boot the bucket spiral, electrical flow residents notice they cannot sell their properties for fifty-fifty bargain-basement prices: no i wants the liability of paying fees for a deteriorating facility.
Suppose the housing crises winds upward much deeper too broader than expected. How would this deport upon the economy? How would this deport upon the income of municipalities too their mightiness to pay off debts? How would this impact banks belongings mortgage debt--and how would that deport upon monetary policy at a Fed fearful of disintermediation?
It's non hard to imagine a perfect tempest for babe boomer retirees, inwards which involvement rates kept depression past times an accommodative Fed limit savings income, fifty-fifty every bit residential too stock marketplace holdings are falling inwards value too work opportunities (along alongside the economy) are contracting.
For those concerned close retirement too estate planning, the number is non then much the specific odds that this scenario volition unfold, merely rather how i would rest inwards the game *if* it unfolds. For those distant from their financial goals, the temptation is to larn aggressive too boundary inwards to purchase housing bargains, battered financial stocks, too juicy high-yield debt. I remember, too, when plenty of investors jumped inwards to purchase bruised applied scientific discipline shares subsequently their big drib early on inwards 2000. They seemed similar bargains when they were 25% off their highs...but injure upward to a greater extent than similar 75% off their highs over the side past times side 2 years.
I believe Tim is bespeak the correct enquiry close finding hedges. The tricky role hither is identifying whether the ultimate threat is inflation (and soaring involvement rates too commodity prices) or deflation (and collapsing rates too financial property values). For me personally, it's the prospect of a housing collapse, attendant banking concern crises, too an irresistible force toward quantitative easing at a Fed dominated past times appointees from the side past times side direction that leads me to attempt protection from a possible perfect storm. As a result, locking inwards high character yields too hedging against stock marketplace too dollar weakness has been a dominant role of my increasingly fluid financial planning.
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