In early May I mentioned that the conditions of our indicators gave a 60% chance that the sideways consolidation in the S&P 500 Index (SPX) was “normal rotation and profit taking that will result in higher prices when it’s done”. They also gave a 40% chance that an intermediate term top was in the works. In that post I also mentioned that various measures of breadth and risk “will need to break down if the market is going to correct”. These measures held up and SPX moved on to new highs. It looks like the odds played out correctly this time and market internals are getting back to normal…although reluctantly. One thing many bears have been mentioning is the number of new highs on NYSE being very low during May even though SPX was within a few percentage points of all time highs. That condition resolved itself this week. The one sign of breadth that has shown the most weakness over the past month is the ratio between SPX equal weight
Over the past week our core market health indicators edged up slightly, but not far enough to move any of the negative categories above zero. As a result, there are no changes to our core portfolio allocations. The current allocations are still fairly cautious and are at odds with our market risk indicator and our other measures of risk. One interesting point I noticed this week is that the pattern being painted by our risk indicators is shaped like a rally out of a significant low (similar to late 2011) rather than breaking out to new highs. In addition, both our core measures of risk and our market risk indicator are getting close to over bought levels. I get the sense that no one wants to fight the current rally, but there aren’t a lot of believers. As always, we don’t need to fight or believe, instead we simply follow the indicators because they’ve served us well in the past. Below is a chart with the current category scores.
We pick new stocks for the Twitter Top 10 portfolio on the first Friday of every month. This month the portfolio picks are weighted to large cap technology and consumer stocks. Below is a chart with the top 15 stocks on Twitter that have strong support from traders and investors. Here’s a performance chart and details of the May holdings. I’ll update the details to closing prices sometime over the weekend. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 5/2/2014 $MU 415 26.31 10918.65 29.54 12259.10 12.28% $AGN 64 169.91 10874.24 165.06 10563.84 -2.85% $INTC 413 26.41 10907.33 28.17 11634.21 6.66% $CELG 74 147.40 10907.60 161.31 11936.94 9.44% $RAD 1387 7.87 10915.69 7.72 10707.64 -1.91% $GTAT 761 16.91 12868.51 15.99 12168.39 -5.44% $ZNGA 2828 3.86 10916.08 2.98 8413.30 -22.93% $XLE 116 93.72 10871.52 96.81 11229.96 3.30% $JNJ 110 99.31 10924.10 103.18 11349.80 3.90% $GE 409 26.68 10912.12 27.18 11116.62 1.87% Cash 102.83 102.83 Totals 111118.67 111482.63 0.33%
It’s the first Friday of the month so it’s time for new picks in the StockTwits Top 10 portfolio. The stocks that have the most support from the StockTwits community are mostly large technology stocks, consumer non-durables, and health care. Overall the portfolio is still somewhat defensive in that it doesn’t have any momentum stocks in the top 10. The addition of Google (GOOG) and chip stocks Micron (MU) and Advanced Micro Devices (AMD) shows a small increase in willingness to take risk. Below is a chart of the 15 stocks with the most support from the StockTwits community over the past month. The May holdings are currently down less than 1% on the month and lagging the S&P 500 Index (SPX) slightly (I’ll update this post with closing prices sometime over the weekend). The under performance is due to a large decline in Zynga ($ZNGA). Here is a performance chart and details. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 5/2/2014
Below is a chart with the bullish intensity scores for the stocks that have been able to maintain momentum with Twitter followers over the past three weeks. Here’s a chart of the stocks with the weakest (most bearish) intensity scores on Twitter.
Below are charts with the bullish and bearish intensity scores for the strongest and weakest stocks on StockTwits over the past two weeks.