Technical Analysis Published by Raymond James & Associates

Transcription

1 Published by Raymond James & Associates P. Arthur Huprich, CMT, (727) , March 8, 2013 Weekly - Bullish on Dividend Growing Companies Friday Morning 03/08...principle of not seeking to be rigidly on the bull or bear side, but rather on the right side of the market... Jesse Livermore The major stock market averages extended their winning streak yesterday as the DJIA, S&P 500, NASDAQ, and Russell 2000 gained 33 points, three points, 10 points, and almost five points, respectively. As a point of reference (resistance) for the S&P 500, its alltime closing high is (10/9/07) and its intraday high is (10/11/07). Relative to yesterday s tape, NYSE volume expanded (708 million), advance decline figures were in-line (+483), new 52-week highs (246), which is tough to use in terms of timing but better to use as an example of participation, lagged. Overall, trading felt lethargic as many stock market participants waited on today s always market moving employment report. Chief Economist Dr. Scott Brown s estimate for the non-farm payroll figure is +135,000, and the consensus is +160,000. Dr. Brown notes: The February Employment Report takes center stage. It s probably worth pointing out that the payroll estimate is accurate to ± 90,000, as well as There s a fair amount of seasonal adjustment in the February jobs report, which could amplify minor weather effects. Consistent with comments that both Chief Investment Strategist Jeffrey Saut and I have made over the past few weeks to months, relative to the relationship between the stock market and fixed income market, while many have been focused on various chart breakouts of stocks market indices, I want to show a different breakout. Shown below is a chart depicting the S&P 500 relative to the 10-Year U.S. T-Note PIT CBOT. In other words, the chart depicts a relationship between U.S. domestic stocks and the U.S. government fixed income market. When the line is rising, like it is now, stocks are outperforming fixed income. When the line is falling, fixed income is outperforming stocks. Chart courtesy of Thomson Reuters. Please read domestic and foreign disclosure/risk information beginning on page 5 and Analyst Certification on page 5. International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

2 So what do you do with this information? Run; don t walk, to today s Morning Tack report, authored by Jeffrey Saut. Side Note: I m sure there is a way to show this relationship using the Exchange Traded Fund (ETF) market but I was unable to identify a fixed income ETF that went back far enough to show this relationship. If you want to pursue this, or any analysis herein, further, your personal financial advisor can contact someone in the Closed End Fund research area. Wednesday Morning 03/06 Trends go further than rational people expect, or even imagine. In a very uncertain world, perhaps nothing makes more sense than simply following trends. ~ John Henry The Tape has Spoken: While I was wrong to believe that the recent near-term consolidation period (the trees ) would lead to more downside probing, the bulls capitalized on last Friday s upside reversal and the new high readings by various Advance - Decline lines and allowed the overall uptrend (the forest ) to carry through. This is consistent with my desire to continue to buy fundamentally and technically attractive stocks that have either a) pulled back to support or b) are not extended above a base breakout point. While the media is frothing at the mouth relative to the DJIA closing at a new all-time high and as Chief Economist Dr. Scott Brown insightfully states, The stock market is a leading economic indicator and we could see a wealth effect in consumer spending - at the high end, that is it is important to realize that: 1) The DJIA is simply confirming what has already been accomplished by the D. J. Transportation Average ($TRAN), the S&P Mid-Cap 400 Index ($MID) and the Russell 2000 small-cap Index ($RUT), to name a few. 2) In reality the DJIA is flat over the past five years while the S&P 500 is basically flat over the past 12+ years - SPX s all-time closing high is 1, (10/9/07), intraday high is (10/11/07) chart below. All of this to say that a tactical asset allocation mindset that would represent a small portion of an account s overall strategic asset allocation model would add tremendous value, in my opinion. S&P 500 (SP50-SPX) 5 Year Daily 1) Near-term support = 1525 (recent breakout point) & 1501 (3/1/13 reversal low. ) 2) 50- DMA support line, currently at 1487, lines up with a Recent reaction support low of ,800 1,600 1,400 1,200 1,000 Price 50 ma 200 ma Until we see: 1) A reversal of trend, 2) an extreme in sentiment or 3) some non-confirmations by certain internal measuring tools, the investment back drop is being dictated by the mantra Don t Fight the Trend. '08 '09 '10 '11 ' Volume '08 '09 '10 '11 FactSet Research Systems Relative to the Advance - Decline lines (A-D Line), the major difference between now and the previous major stock market peaks in 2000 and 2007 is in the relationship between the cash index and their respective A-D Line. Prior to the previous major stock market peaks of 2000 and 2007, the A-D line peaked prior to the cash index, meaning the cash indices went higher but the respective A-D line didn t confirm the move. That isn t the case currently and implies, short-term corrections aside, the ingredients for a major decline aren t yet in place. International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

3 Side Note: Here are the newsletter advisory sentiment figures from Investors Intelligence, and some paraphrased comments: Averages rebounded from their sharp drops on 25-Feb to end that week with small gains. Yet the BULLS declined to 44.2%, the fifth week of lower readings. There was no change for the BEARS at 21.1%. The spread between the bulls and bears contracted to 23.1%. That difference is well below the dangerous territory around 30%, and higher... Monday Morning 03/04 International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

4 Relative to last Friday, stocks opened sharply lower as news and the tape out of Europe weighed heavily. The DJIA was down 117 points early, NASDAQ fell 31 after the opening bell, the S&P 500 lost 13 points and the S&P Mid Cap 400 Index ($MID) fell 16 points. Fortunately, the selling in our markets ended early as some positive domestic economic reports generated an underlying bid and, with the exception of the $MID, the indices just referenced closed higher for the day. While I was encouraged to see the intraday reversal, my short-term concerns expressed last week, namely the domestic stock market proxies are not moving in sync, remain - please refer to my weekly report, dated 3/1/13 for a visual. Also, the near-term selling pressure in the mid-cap universe, which remains a leading area of the market, is picking up please refer to the chart below. Following a high-volume break off the recent top, relative to the negative short-term condition of the tape, I think one key will be if the bulls can capitalize on last Tuesday-Wednesday s bounce as well as last Friday s reversal. Within this short-term context, yet an overall uptrend, tweaking your portfolio around the edges, defined by rebalancing over-weighted or extended positions and tightening stop loss points, seems prudent. NASDAQ Composite Index 31-Aug-2012 to 01-Mar-2013 (Daily) 6 Month - Daily Last: NASDAQ: 6 month chart with rising 50-DMA 3,250 3, , ,100 3,050 3,000 2,950 Giventhetrendlinebreak,whichwas recaptured, & the pattern of lower peaks, holding last week s low of and/or the 50-DMA, is particularly important! 2,900 2,850 2, Day Moving Average Price(COMP) 2,750 Sep Oct Nov Dec Jan Feb 24 FactSet Research Systems S&P 400 New Lows (%) My point here is to show that despite the DJIA (the General ) recording a pattern of higher peaks, selling pressure is picking up. This chart shows some of the troops leaving the battle, normally not a good sign. The opinions offered in this piece should be considered a part of your overall decision-making process. These comments are published individually on a daily basis. This report contains a compilation of several days' worth of comments and is updated weekly. Unless otherwise noted, prices included are as of the previous day's close. For more information about these reports - to discuss how this outlook may affect your personal situation, to learn how this insight may be incorporated into your investment strategy, and/or to receive individual daily reports - please contact your Raymond James financial advisor or use the office locator at to find our offices(s) nearest you today. International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

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