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Market Nuetral May 7, 2011

Posted by Tom in Thoughts.
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“Market Neutral”: that’s the phased used to describe a portfolio when it is hedged out to an Index and in a synthetic Cash position (an equal value of up vs. down securities).  OK, we can’t put the stock market into neutral as such, but the internals are now pretty much evenly split between the Bulls and Bears.

The Accumulation/Distribution pie chart below shows 36.4% with positive money flow, 30.4% neutral and 33.2% with negative money flow, of the 1500 S&P 1500 Index stocks. 

# of Stocks in Accumulation-Neutral or Distribution; S&P 1500

Prices show 27.5% Up / Bullish, 39.2% Neutral and 33.3% Down / Bearish.  That’s about as close to neutral as we can get.  In my opinion, the market is trying to decide its next step, either up or down.  Right now, it’s a toss-up.

What’s moving right now are defensive type stocks with a few exceptions.  That concerns me because it could indicate this is not just a short blip correction down, but may last awhile.  So far, we have NOT seen a clear definition of that, just some rotation into more conservative sectors.

Semiconductor, Healthcare, Transportation, Utilities, Consumer Staples, Steel, Tobacco and BioTech are showing strength.  These sectors have shown strong earnings in the recent weeks and the stocks are holding up well.  Very few ETF’s are passing my screening process (only 1); looks like (nearly) everything is taking a breather for now.

What’s going on with commodities?  Two things, world economies that are recovering slower than thought (perhaps because of high oil prices?) and a sudden strong US dollar (because of continuing debt issues throughout Europe).  Right now I’m not buying or selling, but letting the prices of securities in the portfolio indicate points of exit in a more natural way.

Have a great week and be careful out there.

Charts courtesy of High Growth Stock Investor (www.highgrowtstock.com), (C) 2000-2011, used with permission.

Comments»

1. Roseanne - May 12, 2011

I need to give thanks very much for your job you have made in writing this piece of writing. I am hoping the same perfect work by you down the road also.


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