The wife and I took a week to travel four hours from our home last week. The majority of the trip was on Highway 1 from San Francisco to Monterey, but we stayed a night in Sausalito on the way. It is located just on the North side of the Golden Gate bridge. While I’m sure all of you who have traveled to San Francisco have seen the bridge, I’m guessing that many of you didn’t know that this beautiful lighthouse is only another 10 minutes away. If you’re ever in the San Francisco bay area be sure to add a few hours to visit the park where the lighthouse is located. Be advised that it is only open Saturday thru Monday from 12:30 to 3:30. It was raining with a wind directly into the camera lens and I was too lazy to clean it between pictures so I apologize for the spots in the next picture.
Last week we stated that any rally would need to prove itself for us to expect new highs. Over the past week, we didn’t get quite enough proof. The S&P 500 Index (SPX) had a strong three day rally intra-week, but we didn’t see confirmation of the move in many of the indicators that we follow. Most of our core market health indicators declined even as the market rose. One positive is that our market risk indicator pulled back from its warning signal and is now in an area that would probably take a couple of strong days of selling before warning again. The price action of Nasdaq and the Russell 2000 Index (RUT) were also encouraging as they both regained and closed above their 50 day moving averages. This indicates that market participants used the recent dip to buy technology and smaller cap stocks which often lead rallies. In addition, the number of stocks making new highs on Nasdaq has recovered quickly indicating that technology is being bought at
Over the past week our core market health indicators mostly declined in the face of a sharp three day rally. The only indicator to strengthen was our measures of risk. Risk abated a bit, but it is still in the area that could cause our market risk indicator to warn if the current rally fails. Our measures of the economy slid lower. They just can’t seem to get a foothold and turn up. Our measures of market quality fell substantially, market strength fell slightly, and trend held steady. This is a bit disconcerting and could signal that this rally won’t have legs. None of our measures of market health fell enough to cause changes in our core portfolios, although our measures of market quality and trend are close enough to the zero line that a failed rally may drag them negative. As we stated yesterday, we’re waiting patiently for more information rather than trying to predict the future.
Our Twitter Top 10 portfolio recovered a bit over the past week in spite of Celsion (CLSN) which is now down nearly 37% on the month (don’t say we didn’t warn you). The overall portfolio is down 7.45% from the first Friday of June and up 17.4% from the first Friday of the year. Below is a performance chart and details of the stocks currently in the portfolio. Note: Prices are from roughly 1:00 Eastern on 6/28. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 6/7/2013 $BAC 940 13.38 12577.20 12.95 12173.00 -3.21% $GS 75 166.01 12450.75 151.79 11384.25 -8.57% $F 903 15.73 14204.19 15.6 14086.80 -0.83% $CSCO 513 24.49 12563.37 24.54 12589.02 0.20% $C 243 51.6 12538.80 48.1 11688.30 -6.78% $KORS 200 62.69 12538.00 61.79 12358.00 -1.44% $CLSN 7491 1.68 12584.88 1.06 7940.46 -36.90% $BIDU 122 102.67 12525.74 94.44 11521.68 -8.02% $HD 159 78.74 12519.66 77.24 12281.16 -1.91% $HOT 173 69.17 11966.41 63.52 10988.96 -8.17% Cash 392.5 392.5 Totals 126861.50 117404.1
I’ve been on vacation this week (just got back) so just a quick note about the status of some of our indicators today. I’ll make up for the lack of market comments with some photos if they turned out. We mentioned on Monday that our market risk indicator was warning. That condition cleared itself on the rally that started Tuesday. As we mentioned in that post we were giving the market the rest of the week to prove itself. Well the week is almost over and we’re still waiting. We’ve got an oversold bounce, now we have to see if it holds. A couple of days clearly above the 50 day moving average would go a long way to ease our fears that this is just a dead cat bounce. Our core market health indicators are mostly flat so far this week which isn’t encouraging considering the strong move over the last three days. Our Twitter sentiment indicator for the S&P 500 Index (SPX) has been printing underwhelming numbers against
Micron Technology (MU) and Advanced Micro Devices (AMD) are showing strong sentiment readings on Twitter and moving up on the most bullish list of stocks on Twitter. Cisco (CSCO) and Cree (CREE) are a couple of other technology stocks showing high bullish sentiment, while the rest of the list comes from a wide variety of sectors. This speaks to the broad participation of stocks during rallies this year. We’ll be watching for continued strength across many sectors for indications of a sustainable rally out of the current lows. Below are charts of the bullish intensity scores for the most bullish stocks on Twitter for the week and month ending 6/25/13.
Apple (AAPL) made it back onto the most bearish list of stocks on Twitter. But the overall tone shows weakness in the world economy with symbols like EWZ, EEM, GLD, and XLY. Below are charts of the most bearish stocks on Twitter for the week and month ending 6/25/13.
The current consolidation in the market is causing more stocks to warn or show negative chart and sentiment patterns. In addition, more are showing up with sentiment readings that don’t give a clear indication of the stock’s current status. However, we still have 62% of the 50 most active stocks with positive chart and sentiment readings. The stocks that show negative patterns are roughly the same number as what we saw during the first of May during the first part of the current consolidation. This is somewhat encouraging for the bulls since the market is quite a bit lower, but chart patterns aren’t breaking down and sentiment isn’t showing a build in extreme bearishness either. Below is a chart of the status of the 50 most active stocks. In addition, there are charts showing the intensity scores for the most active stocks for the week and month ending 6/25/13.
Our market risk indicator closed today on a warning signal again. However, as most of you know we require a weekly close before changing portfolio allocations. The market is still at a point where it could recover from the recent weakness and resume its uptrend or at the least bounce from oversold conditions. As a result, we’re willing to give the market the rest of the week to show its hand…even though we really don’t like it. Bottom line, we’re reluctant to make changes ahead of a weekly close especially since the market is so oversold. We’d much rather hedge our portfolios or raise cash after a bounce that fails. Of course, the market never seems to grant our wishes so we’ll simply follow our indicators. For personal portfolios there is nothing wrong with doing some house cleaning and removing (or hedging) positions that make you lose sleep at night. At the very least start building a list of positions that you’d want to trim if the market accelerates lower.
We’re seeing more of the same this week…other than the obvious 2% fall in price. Perception of risk continues to rise, but market internals and our core market health indicators remain fairly positive. Our largest concern is once again our market risk indicator. It signaled during the week, however, the positive price action late in the day on Friday cleared the warning condition. Because our core portfolios are designed for intermediate to long term allocations we require a weekly signal before changing any positions. As a result, our portfolio allocations remain the same. We suspect that we’ll be hedging and raising cash if the market continues to fall into late next week. Our second major concern is the action of bonds and interest rates over the past month. Bonds have been falling with stocks recently which doesn’t bode well for financial markets as a whole. When stocks and bonds move somewhat opposite it reflects rotation between the two asset classes. The past year is a good example where enough money