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Same Old . . . but Some Encouraging Signs December 10, 2011

Posted by Tom in Thoughts.

Not much new to really talk about this week, basically “The Same Old Stuff”.  The world markets continue their roller coaster ride with big days Up (on news) and then big days Down (on news).  But if you follow the markets, you know that.  All of this just shows how nervous folks are, especially as the end of the year approaches (bonuses are tied up into this).

What is interesting is that these moves occur on relatively light volume.  So, one must consider that the action that we’re seeing is the result of short-term traders and the computerize algorithmic trading programs.  These entities are not investing for moves of any length of time, only for the quick buck.  Thus, we need to filter out much of this noise to try to determine directional moves.  I see some signs that could be considered as encouraging.  Let’s see them:

The chart above shows the number of stocks in the broad S&P 1500 Index that at in stages above (green shades) or below (red shades) of their recent price ranges (adjusted for standard deviation).  The bottom line is Green shows general Upward movement, Yellow Neutral (not much movement) and Red generally Downward movement.  (as always, you can click on the picture to enlarge it)   What I see is mostly Green and Yellow . . . not much Red.  Looks encouraging.

Next we look at the number of stocks in the S&P 1500 that are under Accumulation (buying pressure) and Distribution (selling pressure).

                           Charts courtesy of HighGrowthInvestor.com; used with permission; copyright 2010-11.

This time we see more of a mixed story.  The Green (accumulation) and Red (distribution) are about equal and the majority of stocks are Yellow (neutral).  I should note that this indicator takes Price and Volume into consideration, so while price is pretty good, the volume (amount of money into / out of) is generally Neutral. 

This market seems to be bouncing off of Resistance (to upward price movement) at about the 1265 level on the S&P 500 Index.  What we need is a decisive break above 1265 on heavy volume.  That would indicate that confidence has returned to the longer term players and investors.   A solution to the European Debt Crisis and / or very positive domestic economic news would help make that happen.  We’ll see. 

Have a Good Week and Enjoy the Holiday Season.     ………  Tom  ………

         (feel free to leave comments, I always look at them)     🙂


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