Just as we’re starting to see some of the momentum stocks show up on the bearish list, they’re dropping off both the weekly and monthly most bullish list. Stocks like Facebook (FB), LinkedIn (LNKD), Priceline (PCLN), and Yelp (YELP) have dropped out of the top 25 most bullish stocks on Twitter in both time frames. Yahoo (YHOO) is still on the monthly list, but has dropped off the weekly list. At the least we’re seeing market participants taking profits due to the gridlock in Washington. At the worst, the party is over for the high fliers. Somewhere in the middle is an outcome where profits are being taken from the high fliers and will rotate into stocks that have been consolidating. A rotation into high quality stocks that are selling at a discount could still fuel a year end rally if the debt disagreement in Washington is resolved. As I mentioned in the bearish list post, keep an eye on the consolidating stocks to see if they’re holding up better
Berkshire Hathaway (BRKB) made its debut on the most bearish list this week. It has been lagging the market since this rally began so it’s something to watch if it continues to under perform during the current dip. Below are charts with the bearish intensity scores of the most bearish stocks on Twitter for the week and month ending 8/27/13.
In early September we posted a chart about value stocks warning of a correction. Today we’re seeing almost the exact same pattern playing out again. The chart below compares the S&P 500 Index (SPX) to Berkshire Hathaway (BRKB) (we use it as a proxy for value stocks). Notice how SPX put in a lower low during the September through November correction while BRKB held above its last minor low. This shows that as the market fell into mid November investors were taking money from the general market while others were allocating money to value stocks. During the subsequent rally BRKB is making new highs. SPX on the other hand is stalling at its recent peak. This is a sign that investors are still moving money into defensive stocks. They’re looking for value that will hold up relatively better in a down trend. If you look at the charts of some of the most loved stocks during the first part of 2012 you’ll be able to see where the money to
Just after Labor Day we made a post about value stocks warning of the market nearing a top. Today we’ve updated the chart that shows Berkshire Hathaway (BRKB) and the S&P 500 Index (SPX). As you can see, the rotation to value has continued over the past month. This is evident by the price of BRKB continuing up while SPX moves sideways. As we mentioned in the previous post, this is a sign that we’re closer to the top of a rally than a bottom. Money managers continue to move slowly but surely to safety. This in itself isn’t a near term problem because it takes managers with a lot of money time to make major adjustments to their portfolios. Big dollar sellers try to sell into strength so they don’t move the markets much as they change positions. This slow steady distribution and rotation is what creates tops that last several months before they are recognized. When we look at value stocks (using BRKB as a proxy) out performing
A few weeks ago we highlighted Nasdaq new highs as one of the things that had us concerned that this up trend is in the late stages (rather than a new long term up trend off the June lows). We like to watch several measures of market health to get a feel for where the S&P 500 Index or Nasdaq is headed next. Another sign that we could be near the end of this up trend is the rotation to value stocks that started in April of this year. In the chart below we show Berkshire Hathaway (BRKB) as a proxy for value stocks compared to the S&P 500 Index (SPX). Notice that the small sell off in April and the subsequent rally in May created a divergence between BRKB and SPX. BRKB made new highs and SPX didn’t confirm. The next leg down in SPX created a decent size correction, however, BRKB diverged again by not making a lower low. This action showed money moving out of stocks in