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Go to: Top | Short-term Outlook | Int-term Outlook | Equity Updates | Indicator Summary | Commodity Updates
Short-term
Outlook (1-5 Days):
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Intermediate-term Outlook (1-3 Months):
Today's Update: We will remain Neutral for now.
Why: On
April 15th, the Dumb Money pushed up to 75%, and the
spread between that and the Smart Money reached to -45%.
In addition, we got a tremendous surge in the number of
bearish (for the market) Indicators At Extremes.
After we got the expected weakness and volatility exploded
higher, we experienced a very unusual situation with the "shock
day" on May 6th. We looked at somewhat similar days
on
May 7th, and the conclusions were clear - a
short-term rally was likely, probably being capped at a
62% retracement of the crash, then a re-test of the
panic lows. Since late May, we've looked at
quite a few bullish intermediate-term studies - we got
a major surge in pessimism, then several positive breadth
thrusts and positive price performance, all in the context
of an ongoing bull market. That has led to consistent
and significant gains when looking over the next 2 weeks to
1 month. However, June 4th's Payroll Report kneecapped
the nascent rally attempt and took us to a new closing low.
That is very unusual given the studies we discussed and
cannot be dismissed. But since we have seen a lot of
give-up among
Rydex traders
and
small options traders, and the S&P made another go at a breakout
above resistance, we were willing to give the
bullish outlook another shot. On June 22nd the S&P
fell back under its breakout level, and has since moved to a
new closing low, so we are standing aside in the
intermediate-term until a clearer picture emerges.
Recent Studies:
Two up days after a month without (6/04):
Bearish
Multiple breadth thrusts (5/28): Bullish
Extremely high ADX reading (5/27): Bullish
Oversold Indicator Score (5/21): Bullish
Sentiment:
Trend:
Back to mostly neutral readings.
Mixed long-term trend signals. Sup /
Res:
Other:
R: 1140; S: 1040 Nothing notable.
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Short-term Outlook
| Int-term Outlook |
Equity Updates |
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Commodity Updates
Equity Indicators - Updates and Extremes % Of Fidelity Select Funds Beating Cash On Friday, we touched on a breadth indicator that was
showing an extremely rare level of oversold (the
percentage of S&P 500 stocks above their 50-day moving average). Another breadth measure that's very close to marking a
historic extreme is one we haven't discussed in several years, the
percentage of Fidelity Select funds that are out-performing cash.
See
this comment from June 13th, 2006 for some background on it. What we're looking at is the percentage of sectors (out
of 40) in the Fidelity Select mutual fund family that have given a
better return than cash over the past quarter. Since cash is returning only slightly better than 0%, it
shouldn't be a tough hurdle...but it has been. Only Gold has done
better, but that fund is the last holdout and it's dangerously close to
falling behind the return on cash. If so, it would bring this
breadth measurement to 0%. Here's how the S&P 500 fared going forward when the
percentage first dropped to 0%: 1 Week Later 2 Weeks Later 1 Month Later 3 Months Later 6 Months Later 12 Months Later Both the average return and percentage of time positive
figures were robust, and well ahead of any random time (which makes
sense). The interesting thing is the reward-to-risk ratio.
It was positive all along the various time frames, and increased each
time - the longer you held, the better your average reward compared to
the risk you took. That means that much of your risk was concentrated in
the shorter-term. When you look at the S&P's three-month
performance, almost half of your maximum risk was eaten up during the
first week, but only about a third of your average maximum reward. Unfortunately, this isn't one of those times when simply
waiting for a week to buy made a lot of sense - in fact, all the
performance figures dropped by doing so. That's because often, the
market rallied strongly immediately after becoming this oversold...but
when it didn't, sometimes it really cracked hard. So there is most definitely a positive bias across all
time frames when we see such horrid performance across a wide survey of
market sectors, and the reward for getting the timing right is
exceptional. But you just have to watch out for those rare
instances when the market cannot find its footing right away and instead
melts into crash-like scenario.
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Short-term Outlook
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Equity Market Indicators
Notes: In mid- to late-May, we saw as many as 40% of our indicators at a bullish (for the market) and as little as 0% at a bearish one. That was the widest spread since March 2009, though it has gotten as high as 50% - 70% at some of the true panic lows over the years. On June 29th, we got another spike in bullish indicators above the 30% level...but again it's below what we've seen at many of the prior major lows.
More history:
* New extreme
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Bonds, Commodities and Currencies - Updates and Extremes
Nothing notable for today.
Jason Goepfert Founder, Sundial Capital Research, Inc.
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July
6, 2010,
7:45am EST
Neutral
Since June 24, 1067
SPX
