Friday, October 17, 2014

Some bullish signals from the US financials:



I have learned that (thanks to the great Ian Notley) – no bull market can operate without the leadership – or participation from the financial sector of stocks. This rule would apply to most of the mature global equity markets.

Now according to Sector SPDRs the SPDR Select Sector Financial (XLF) is a wide array of diversified financial service firms are featured in this sector with business lines ranging from investment management to commercial and investment banking. Among the companies included in the Index are JPMorgan Chase, Wells Fargo, and BankAmerica Corp. Currently the top weight is Berkshire Hathaway B (BRK.b) at 9.0% followed by the usual suspect banks and then Goldman Sachs Group Inc, (GS) at 2.6%.

Note the chart displaying Berkshire – weekly above Goldman – weekly plotted with their respective 10  & 40 week simple moving averages – clearly both still trading above a rising 40 week (or 200 day M/A) – so there is no break in these bellwethers. By the way both lead us out of the 2008 financial crisis with the Berkshire bottom in Feb 20, 2009 and the Goldman bottom in November 21, 2008 


Monday, October 13, 2014

Time to watch the Russell 2000:



Just the repeat once again on market breadth “The Advance / Decline Line (AD line) is one of the most widely used indicators to measure the breadth of a stock market advance or decline. The AD line tracks the net difference between advancing and declining issues. It is usually compared to a market average where divergence from that average would be an early indication of a possible trend reversal.”

They say a picture is worth a thousand words.  

Our latest NYSE advance / decline line displays a break down below the pivot – the early August lows. The problem now is the S&P500 has just confirmed the A/D line break by also breaking below the early August lows

Now the pain is close to the end as the Russell 2000 (the first the break down) currently at about 1049 - is only 50 points above major support as viewed by a point & figure.


Saturday, October 4, 2014

Market breadth – Still No Breakdown:



Just the repeat once again on market breadth “The Advance / Decline Line (AD line) is one of the most widely used indicators to measure the breadth of a stock market advance or decline. The AD line tracks the net difference between advancing and declining issues. It is usually compared to a market average where divergence from that average would be an early indication of a possible trend reversal.”

The last time we looked – the breadth problem was acute as we needed the A/D line to hold at the early August lows to complete a shallow A-B-C type correction. Now as displayed in the latest chart as of the Friday Oct 3, 2014 close, we can see both the S&P500 and the NYSE Advance / Decline line holding just above the respective early August lows. So far we have just a rolling sector rotational correction as the energy & materials trade inversely to the consumer, financial and health care sectors. Most notable is the Dow Transports bouncing back above the short 50 day M/A which is well above the longer 200 day M/A