Breadth By The 50-Day

As the market continues to rally, the percentage of companies now trading above their 50-day moving averages also continues to rise.  As shown below, 92% of the stocks in the S&P 500 are now trading above their 50-days.  This is by far the highest reading since mid-2006, and it is indicative of extremely strong market breadth.

Every sector except Health Care and Consumer Staples has a >50-DMA reading of more than 90%.  The Consumer Staples sector is at 88%, and Health Care is at 75%.  Telecom only has 9 stocks in the sector, and all of them are trading above their 50-days.  The Industrials sector ranks second at 98%, followed by Energy and Utilities at 97%.  While still high, Financials and Consumer Discretionary have actually seen a decline in the percentage of stocks above their 50-days over the last week.  The indicator maxes out at 100%, so there isn’t currently much upside room from a breadth perspective.  A pullback in these extraordinary numbers would be neither surprising nor unhealthy.

Source: Bespoken Research

ASX Market Report 23-4-09

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The SFE Futures suggested a 12 point fall in the market. BHP and RIO mixed in ADR form overnight – BHP down 1.22% and RIO up 5.13%. (BHP closed at the equivalent of 3204c, up 55c on yesterday’s close.) Metals mostly up overnight - Copper up 0.73%, Zinc down 0.34% and Aluminium up 0.69%. Nickel up 0.17%. Oil price up 76c to $47.41. Gold up $9.80 to $892.50. Bonds down with the 10 year yield up to 2.9397%. A$/US$ down 0.09% to 70.47c.

Morgan Stanley down 9% posting a larger-than-expected $578m loss over the quarter – noted a deterioration in the commercial real estate market. The loss was also comprised largely from an improvement in the value of its own debt. They also announced a dividend cut. Bank of America down 5.7%. Wells Fargo did well for most the session but closed down 3.4% – earnings fell inline with their guidance but beat analyst’s expectations - they also posted higher credit losses. The better-than-expected earnings came largely from increased mortgage revenue. AT&T up 1.82% – the US’s biggest telecommunications carrier – surpassed analyst,s expectations with strong results across its wireless business. Yahoo! up 0.70% as it plans to cut 700 jobs – earnings were down 78% for the quarter but better-than-expected.

The market is up 42. The SFE Futures suggested a 12 point fall in the market this morning. Strong performance this morning after yesterday’s mixed session. Resources up 1.3% – BHP and RIO up 1.5% and 5.4%. Financials up 0.9%. Property down 0.6%.Industrials down 0.2%.

Tricom Today Australian Stock Report 14-4-09

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The SFE Futures suggested a 63 point rise this morning. BHP and RIO both up – 3.76% and 3.95% respectively. (BHP closed at the equivalent of 3318c, up 73c on Thursday’s close.) Metals all up overnight – Copper up 3.16%, Zinc up 1.45% and Aluminium 2.88%. Nickel up 0.59%. Oil price down 3.9% to $50.22 on the IEA forecasting lower global demand by 1m barrels per day. Gold up $12.50 to $895.80. Bonds flat with the 10 year yield at 2.8607%. A$/US$ down to 73.16c.

Goldmans Sachs released their results a day early – posted better-than-expected earnings beating expectations. Goldmans said they would raise $5bn in an equity offering to assist in paying back the government’s bailout funds. Achieved EPS of $3.38 a share in the quarter, well past the $1.64 expected. EPS in the same quarter
last year was $3.23. The positive result followed Wells Fargo’s preliminary results guidance on Thursday which also outperformed expectations. Industrials are now the worst performing sector year-to-date – down 12.9%. But were
up 0.4% Monday with General Electric leading the way.

The market is up 89. The SFE Futures suggested a 63 point rise in the market this morning. Our market is up following a 220 point rise on Wall St since we closed on Thursday. Financials
up after a strong session in the sector on Wall Street overnight and on Thursday – all the banks
up 3-4% this morning. Qantas down 7% on a profit warning.

Tricom Today ASX Stock Report 1-4-09

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BHP and RIO both up in ADR form overnight – 3.58% and 0.80% respectively. (BHP closed at the equivalent of 3222c, up 31c on yesterday’s close.) Metals mostly up overnight – Copper up 3.32%, Zinc up 0.38% and Aluminium down 0.14%. Nickel up 2.87%. Oil price up 2.4% to $49.67. Oil locked in its largest monthly rise since May last year – largely due to the rally in equity markets and the lower US dollar. Gold up $7.10 to $922.60. Bonds down with the 10 year yield up to 2.6674%. A$/US$ up 1.61% to 69.23c. Financials up 6.7% – up 8.1% at best. Up 17.6% over March.

The TED spread (the difference between 3-month Treasury bills and 3-month Libor) dropped under the 1% mark again, encouraging the rise in financials. Technology stocks up – Brokerage Davenport moved Microsoft to a BUY on the increased sales of computers in China and the United States. Said there is the potential of restocking to come in Europe. Material stocks up- Alcoa up 10% after falling 14% the previous day, on rumours BHP is about to make a takeover play on the Aluminium producer. Deutsche Bank upgraded the stock a week before its 4Q results.
General Motors new CEO said bankruptcy is ‘more probable’ under the new tougher requirements for government aid. GM is already planning to shut 5 plants, is likely to have to ‘take more measures’.

The market is down 1. The SFE Futures suggested a 27 point gain this morning. The big news today is Oz Minerals receiving another bid from Minmetals excluding Prominent Hill and Wayne Swan giving Hunan Valin the green light to buy a 17.55% stake in FMG. Property Trusts dong well today. Industrials down 1.7%. Financials up 0.3%.

Percentage of US Stocks Above 50-Day Moving Averages

Below we highlight the percentage of stocks trading above their 50-day moving averages for the S&P 500 and its ten sectors.  This is a good breadth indicator to measure the underlying strength or weakness of rallies or declines.  As shown, 62% of the stocks in the S&P 500 are currently trading above their 50-days, which is getting close to the 75%-80% level that we’ve seen at prior market peaks during this bear market.

In the Financial sector, 69% are trading above their 50-day moving averages, which is the highest level in about a year.  This speaks to the strength of Financials during this rally.  On the other hand, Industrials, Health Care, and Utilities all have less than 50% of stocks trading above their 50-days, which means breadth has lagged during the rally for these sectors.  Breadth has been strongest for Technology, Materials, Energy and Telecom.  More than 70% of stocks in each of these sectors are currently trading above their 50-days.

Source: Bespoke Research

Tricom Today ASX Stock Market Report 23-3-09

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The SFE Futures suggested a 20 point fall in the market. BHP and RIO both down in ADR form Friday – 1.29% and 0.18% respectively. (BHP closed at the equivalent of 3224c, up 6c on Friday’s close.)Metals down Friday – Copper down 1.10%, Zinc 0.32% and Aluminium 0.27%. Nickel down 0.30%. Oil price up 0.20% to $51.55 on a quite day in the energy sector after oil’s best weekly run in a month. Gold down $2.60 to $956.20. Bonds up slightly with the 10 year yield down to 2.6309%. A$/US$ up 0.49% to 68.99c. Industrials down 3.3% – General Electric down despite positive broker comments about their capital position and liquidity. Defensive stocks outperformed – up 0.1%. Healthcare up 0.2%Defensives have been the worst performers over the last couple of weeks during the rally. Financials down 5.3% – still up 40% since March 6th – Treasury’s Geithner is expected to announce Monday the details of the government’s $1 trillion package to buy troubled securities from the balance sheets of major banks utilizing the new government entity – the Public Investment Corp – using the resources of the $700bn bank bailout fund announced on February 10. The market has started the week off in a positive mood 0- up 43 – despite the SFE Futures suggesting a 20 point fall this morning and the 122 point fall in the US on Friday. Financials, Property Trusts and Resources are maintaining their recent good form.

What are the signs of a final bottom? – Richard Russell

“Will the evidence come from the D-J Averages? I think it might. At the final bear market bottom, we should see:

(1) a dramatic non-confirmation by either the Industrials or the Transports (this is what occurred in 1974).

(2) or we might see an extended ‘line’ in the Averages, in which the Averages fluctuate within a 5% zone for many weeks on low volume. At some point both averages will surge higher on increasing volume.

(3) Values – We will see blue chip stocks selling ‘below known values’ with P/E ratios at single digits and the yield on the Dow near 6%.

“In the area of the final bear market lows, public attitude towards stocks and the stock market will be black-pessimistic and even angry. Wall Street will be despised and denounced as a scam. Actually, we are beginning to see just a bit of that via the highly-publicized debate between Jim Cramer and John Stewart, in which Stewart literally calls both Cramer and Wall Street a fraud.

“Already the public is turning against Wall Street, and, of course, the Bernie Madoff scheme only adds to the public anger against the ‘crooks of Wall Street’. Already, the ‘buy and hold’ creed (religion?) is being denounced along with the image of stocks as wealth-building vehicles. Warren Buffett is being tarred and feathered – Berkshire Hathaway lost billions of dollars over the last year, despite Buffett’s cheer-leading role a few months ago when he announced that he was buying stocks.

“Taking it to the present, the big question is whether we have already seen the bottom of the bear market and whether the recent strength in the market is the beginning of a new bull market. My opinion is that the latest rally is part of a bear market correction – not the beginning of a new bull market. The primary trend was recently re-confirmed as bearish when both the Industrials and the Transports broke to simultaneous new lows.

“One hint as to where we are is that prior to a major low, Lowry’s Selling Pressure Index (supply) turns down while their Buying Power Index (demand) leads on the upside. This did not occur at or near the recent lows.”

Source: Richard Russell, Dow Theory Letters, March 16, 2009.

The Point & Figure – Richard Russell from Dow Theory Letters

Richard Russell (Dow Theory Letters), 84-year old doyen of investment newsletter writers, interprets the technical situation as follows: “The Point & Figure chart below may currently be the most important single chart in the world. This is the DJ Industrial Average, and it’s in the act of testing its November 20 low. If the Dow violates its low, it will have confirmed the prior bearish penetration of the Transportation Average. If that happens, the primary bear market will be reconfirmed. But if the Industrials stubbornly refuse to break to a new low, then the inference is that something else is happening. The inference is that the bear market may be forming a temporary bottom.”

“What I think we’ve seen, so far, is the end of forced selling. At this point, professionals are trying to gauge whether the huge market collapse of 2007-2008 has discounted the worst to come or whether ‘the worst’ still lies ahead,” said Russell. “The drama should be played out over the next week or so.”

Tricom Today 9-2-09

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The market is up 36 – up 59 at best this morning – underperforming the 85 point rise predicted by the SFE Futures. Financials up only 0.2% – bit disappointing after the 8% rise in US financials Friday ahead of the Obama Administration’s update on the new stimulus package due Monday. The resources sector up 3.6% on the back of BHP and RIO up 3.8% and 5.6% – following strong performances in the US overnight. Miners all up on the rise in metals prices Friday. Energy stocks mixed on the lower oil price. Industrials up 1.1% – Orica up 7.8% early. Coca-Cola Amatil (CCL) was down 12% on the open as it parent Coca-Cola Co ceased merger talks with Lion Nathan (LNN) over the weekend. LNN up 4% on the announcement.

Resistance of the Dow

Here is Richard Russell’s (Dow Theory Letters) interpretation of the situation: “Frankly, I’m very impressed by the stubborn and continuing resistance of the DJ Industrial Average. I don’t think many analysts realize the extreme importance of the Industrial’s steady refusal to violate its November 20 low. The action of the Dow contains the answer to the trillion-dollar question – ‘Is the bear market in a halting process – or will the stock market signal a continuation of the primary bear market?’

“So here we are – at a crossroads to history. The market will issue its verdict when, and only when, it is ready. But for now – if there’s anything traders love, it’s a market rising in the face of lousy news.

“An optimistic outcome would be a continued refusal by the Industrials to close below 7,552. An obviously more bullish outcome would be the DJ Industrial Average and the DJ Transportation Average continuing to rally and ultimately (both Averages) bettering their early-January peaks.

“Clearly, the most bearish outcome would be the Industrials finally breaking below the November 20 low and thereby confirming that we are still locked in a continuing primary bear market.”

Tricom Today 5-2-09

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The market is down 14, dropping off as the morning progresses – underperforming the 14 point rise predicted by the SFE Futures this morning. Resources up 4.6% – most other sectors down. BHP and RIO up 5.2% and 7.6% early on. Fortescue Metals up 9% on the open. Most the miners up on the strong base metal prices and research from one broker suggesting the iron ore market is improving with BHP saying Chinese dstocking of iron ore had run its course. Gold stocks strong on the higher gold price. Industrials down 4.1% . Lend Lease has placed $302m of shares overnight at 605c and fallen 17.2% to 560c putting the placees over $20m underwater. Qantas. capital raising went through near the bottom end of the placement range at 185c and the price is down 17% to 190c this morning. Placees are just above water. Leighton Holdings up 2.7% on the back of winning a $475m contract in Abu-Dhabi. Banks down between 2-4%. UK banks had a bad night and there are concerns over Obama.s plans for financial resurrection.

Tricom Today 4-2-09

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The market is down 19 bit disappointingconsidering the 26 point rise predicted by the SFE Futures this morning. All sectors down.Property falling heavily again on the back of the Westfield $2.9bn capital raising yesterday 276.2m new shares WDC down 13% earlyon and already back to the 1050c placement price – sector down another 9.9% after a 6.3% fall yesterday. BHP is up 1.8% after posting interim results at the bottom end of the expected range but with a confident statement.Fortescue up 5% early on restructuring some shipping contracts with Bocimar. RIO down
1.4%….the BHP results took the shine off itdespite an 8% rise in ADR form. Base metal stocks mixed. Industrials down 1.1%. Banks all down 1-2% except for Westpac Bank which is up 1.2%.

Tricom Today 29-1-09

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The market is up 29 underperforming the 63 point rise predicted by the SFE Futures this morning. Resources leading the way up 1.8% – BHP up 4.6% and RIO down 1.3%. Lots of RIO research this morning discussing the options for a capital raising after the announcement yesterday that a rights issue was a possibility. Financials up 1.0% – banks all up 1% or 2% – NAB outperforming up 3.0%. Industrials lagging – down 1.1% – Wesfarmers down 3.3% announcing a retail entitlement offer.