Guest View
User: Pass: | become a member
*** Test Environment ***
Author Archive for Chart School

The Mega-Bear Quartet and L-Shaped "Recoveries"

Courtesy of Doug Short

Note from dshort: I retired this chart series last summer in deference to my prefered inflation-adjusted series that aligns the S&P 500 2000 high with the Nikkei peak in 1989. However, I continue to receive requests for this version, despite the “V” shape of the the recovery since the March 2009 low.


This chart series overlays the current S&P 500 with the L-shaped “recoveries” after the Dow Crash of 1929, the Nikkei 225 after Japan’s 1989 bubble, and the post Tech Bubble NASDAQ. Click the chart below for a larger version and use the links to see various comparisons.

Click to View
Click for a larger image

I’ve also included an updated two-decade inflation-adjusted chart, which gives us a fascinating visualization of the impact of inflation on long-term market prices. The higher the rate of inflation during a bear market, the greater the real decline. Compare, for example, the peak of the Dow rally in year seven with the same peak in the two-decade nominal chart. The difference is the result of deflation during the Great Depression.

It’s rather stunning to see the real (inflation-adjusted) decline of the Nikkei, two decades years after its crash. The recent lows rival the traumatic Dow bottom in 1932, less than 3 years after its peak.

These charts remind us that bear markets can last a long time. And it’s not necessary to go back to the Great Depression for an example.

See also my preferred version, which puts the start of the current secular bear in 2000 with the popping of the Tech Bubble. In inflation-adjusted terms, the S&P 500 reached its all-time high in March 2000. Although the nominal high in October 2007 was higher, the “real” high was not.

Note: These charts are not intended as a forecast but rather as a way to study the today’s market in relation to historic market cycles.





The "Real" Mega-Bears

Courtesy of Doug Short

It’s time again for the weekend update of our “Real” Mega-Bears, an inflation-adjusted overlay of three secular bear markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high.

Click to View
Click for a larger image

This chart is consistent with my preference for real (inflation-adjusted) analysis of long-term market behavior. The nominal all-time high in the index occurred in October 2007, but when we adjust for inflation, the “real” all-time high for the S&P 500 occurred in March 2000.

Here is a nominal version to help clarify the impact of inflation and deflation, which varied significantly across these three markets.

Note: These charts are not intended as a forecast but rather as a way to study the today’s market in relation to historic market cycles.





Michigan Consumer Sentiment Index Falls Sharply

Courtesy of Doug Short

The University of Michigan Consumer Sentiment Index preliminary report for March came in at 68.2, down from 77.5 in February and a stunning reversal from the recent trend of improving sentiment. The Briefing.com consensus expectation had been for 76.5 and Briefing.com’s own forecast was for 78.0.

The survey’s measure of current economic conditions dropped to 83.6, from 86.9 the month before. Consumer expectations fell to 58.3 from 71.6, the lowest level since March 2009.

Consumer inflation expectation rose to 4.6 percent from 3.4 percent in February, the highest since August 2008. The 5-10-year inflation outlook rose to 3.2 percent from 2.9 percent. The increase in gasoline prices was no doubt a factor.

See the chart below for a long-term perspective on this widely watched index. Because the sentiment index has trended upward since its inception in 1978, I’ve added a linear regression to help understand the pattern of reversion to the trend. I’ve also highlighted recessions and included real GDP to help evaluate the Michigan Consumer Sentiment Index as an indicator of the broader economy.

Click to View Click for a larger image

To put today’s report into the larger historical context since its beginning in 1978, consumer sentiment is about 21% below the average reading (arithmetic mean), 20% below the geometric mean, and 22% below the regression line on the chart above. The current index level is at the 13th percentile of the 399 monthly data points in this series.

For the sake of comparison here is a chart of the Conference Board’s Consumer Confidence Index (monthly update here). The Conference Board Index is the more volatile of the two, but the general pattern and trend are remarkably similar to the Michigan Index.

Click to View Click for a larger image

And finally, the prevailing mood of the Michigan survey is also similar to the mood of small business owners, as captured by the NFIB Business Optimism Index (monthly update here).

Click to View
Click for a larger image

Consumer and small business sentiment remains at or near levels associated with other recent recessions, but the trend has been one of strong improvement. We now must wonder if the latest Michigan reading foreshadows a reversal in other sentiment indicators.





The ECRI Weekly Leading Growth Index Up Slightly

Courtesy of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues its rise. The Growth Index is now at 6.7 based on data through March 4.

The Published Record

The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

Click to View
Click for a larger image

A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s. It lagged one recession (1981-1982) by nine weeks. The WLI did turned negative 17 times when no recession followed, but 14 of those declines were only slightly negative (-0.1 to -2.4) and most of them reversed after relatively brief periods.

Three other three negatives were deeper declines. The Crash of 1987 took the Index negative for 68 weeks with a trough of -6.8. The Financial Crisis of 1998, which included the collapse of Long Term Capital Management, took the Index negative for 23 weeks with a trough of -4.5.

The third significant negative came near the bottom of the bear market of 2000-2002, about nine months after the brief recession of 2001. At the time, the WLI seemed to be signaling a double-dip recession, but the economy and market accelerated in tandem in the spring of 2003, and a recession was avoided.

The Latest WLI Decline

The question had been whether the WLI decline that began the the Q4 of 2009 was a leading indicator of a recession. The published index has never dropped to the -11.0 level in July 2010 without the onset of a recession. The deepest decline without a recession onset was in the Crash of 1987, when the index slipped to -6.8. The ECRI managing director correctly predicted that we would avoid a double dip. The latest GDP for Q4 of 2010, revised down slightly to 2.8, confirms the ECRI stance.

The WLI Versus Other Macroeconomic Indicators

For additional perspective on the performance of this indicator, see Comparing the ECRI Weekly Leading Index with Two Key Competitors, which highlights the curious behavor of the WLI following the 2008 Financial Crisis.

Click to View
Click for a larger image

The ECRI Weekly Leading Index appears to be more sensitive to upturns than either the Philly Fed’s ADS Business Conditions Index (ADS) or the Chicago Fed’s Current Activity Index.





S&P 500 Over the Long Haul: Connecting the Dots

Courtesy of Doug Short

Technical analyst Chris Kimble takes a long look at the S&P 500 and asks whether we’re at a major price point suggested by a resistance line that dates from the mid-1980s.

Click to View
Click for a larger image

Chris comments: The 1987 highs and the 2002-2003 lows were important price points in history.

A key resistance line, drawn from these to key dates, is coming into play right now in the S&P 500 index.

Is this line the reason the index has been down of late? Too early to tell, yet worth watching!


For the most up-to-date Kimble analysis, check out Chris’s blog: Kimble Charting Solutions.





S&P 500: Down for the Week, But Above 1300 and the 50-Day Moving Average

Courtesy of Doug Short

The S&P 500 closed the day up 0.71% but the week down 1.28%. Today’s bounce, on weak volume, put the index back above its 50-day moving average and the symbolic 1300 level. The index is 92.8% above the March 9 2009 closing low, which puts it 16.7% below the nominal all-time high of October 2007.

Click to View
Click for a larger image

For a better sense of how these declines figure into a larger historical context, here’s a long-term view of secular bull and bear markets in the S&P Composite since 1871.

For a bit of international flavor, here’s a chart series that includes an overlay of the S&P 500, the Dow Crash of 1929 and Great Depression, and the so-called L-shaped “recovery” of the Nikkei 225. I update these weekly.

These charts are not intended as a forecast but rather as a way to study the current market in relation to historic market cycles.





Getting Technical: Weekend Update

Courtesy of Doug Short

Here’s the latest weekend update from Serge Perreault, a Chartered Accountant and market technician located near Montreal, Canada. Serge has been following the U.S. market in a series of weekly charts. Here is his update on the S&P 500.


The S&P 500 broke a support this week but remains neutral, on 0.8% below-average volume and on falling but near-support momentum. A clear break of the EMA10 could suggest a gradual descent in the direction of the EMA40.

Click to View
Click for a larger image

Note: For newcomers to technical analysis, here are brief explanations for the two key indicators that Serge features:

  • ROC (Price Rate of Change)
  • RSI (Relative Strength Index)






Getting Technical: Weekend Update

Courtesy of Doug Short

Here’s the latest weekend update from Serge Perreault, a Chartered Accountant and market technician located near Montreal, Canada. Serge has been following the U.S. market in a series of weekly charts. Here is his update on the S&P 500.


The S&P 500 broke a support this week but remains neutral, on 0.8% below-average volume and on falling but near-support momentum. A clear break of the EMA10 could suggest a gradual descent in the direction of the EMA40.

Click to View
Click for a larger image

Note: For newcomers to technical analysis, here are brief explanations for the two key indicators that Serge features:

  • ROC (Price Rate of Change)
  • RSI (Relative Strength Index)






S&P 500: Down for the Week, But Above 1300 and the 50-Day Moving Average

Courtesy of Doug Short

The S&P 500 closed the day up 0.71% but the week down 1.28%. Today’s bounce, on weak volume, put the index back above its 50-day moving average and the symbolic 1300 level. The index is 92.8% above the March 9 2009 closing low, which puts it 16.7% below the nominal all-time high of October 2007.

Click to View
Click for a larger image

For a better sense of how these declines figure into a larger historical context, here’s a long-term view of secular bull and bear markets in the S&P Composite since 1871.

For a bit of international flavor, here’s a chart series that includes an overlay of the S&P 500, the Dow Crash of 1929 and Great Depression, and the so-called L-shaped “recovery” of the Nikkei 225. I update these weekly.

These charts are not intended as a forecast but rather as a way to study the current market in relation to historic market cycles.





New falling channels

Courtesy of Chris Kimble

CLICK ON CHART TO ENLARGE

New falling channels appear to be forming in the 4-pack above. Rallies should be expected inside of these channels.  Key to these channels, can the top of the falling channel be taken out!





 

Phil's Favorites

Jobless Claims Improve, Leading Indicators Decline: Economic Report Card

Courtesy of John Nyaradi.

Jobless claims improve while leading indicators decline in today’s economic report card

by Wall Street Sector Selector Staff

Weekly jobless claims declined to 424,000 from last week’s 432, 000 but stubbornly stayed above the all important 400,000 level for another week.

August Leading Indicators came in at +0.3% compared to 0.5% for July, as the economy continues registering weakness.

Good news came from July Home Prices which rose to +0.8% from the previously reported +0.7%.

But the biggest economic news of the week came yesterday when the Federal Reserve said it saw  “significant downside risks to the economic outlook, including strains in global financial markets.”

Global stock markets responded negatively yesterday an...



more from Ilene
 
 

Insider Scoop

Priceline.com Trades Higher on Q1 Earnings Results (PCLN)

Courtesy of Benzinga

Shares of Priceline.com Incorporated (NASDAQ: PCLN) are trading higher in the after-hours following the release of its Q1 earnings results. Currently, shares are up 2.74%, trading at $548.60; they closed the regular session down 0.67 %, at $533.97.

The company said that its Q1 EPS came in at $2.66 on revenues of $809.3 million; this compares to the Street's estimate of $2.46 per share on revenues of $779.5 million. Revenues rose 38.6% year over year.

"In the 1st quarter, the Group benefited from strong growth in our global hotel business, particularly at Booking.com and Agoda," said Jeffery H. Boyd, Priceline President and Chief Executive Officer.

He added, "Room nights booked grew by 55.8% and our international gross bookings grew by 79% compared to prior year...



http://www.insidercow.com/ more from Insider

Zero Hedge

Fukushima Explosion Update: Core Presumed Intact As Sea Water Used To Bring Temperature Down, Radiation Level At 1015 Microsieverts/Hour

Courtesy of Tyler Durden

The damage control to the Fukushima explosion reported earlier is coming fast and furious. According to CNN, "the explosion at an earthquake-damaged nuclear plant was not caused by damage to the nuclear reactor but by a pumping system that failed as crews tried to bring the reactor's temperature down, Chief Cabinet Secretary Yukio Edano said Saturday. The next step for workers at the Fukushima Daiichi plant will be to flood the reactor containment structure with sea water to bring the reactor's temperature down to safe levels, he said. The effort is expected to take two days." While the government is trying to play down the threat from the explosion, it has nonetheless double the evacuation zone radius from 10 to 20 kilometers: "Radiation levels have fallen since the explosion and there is no immediate danger, Edano said. But authorities were nevertheless expanding the evacuation ...



more from Tyler

Chart School

The Mega-Bear Quartet and L-Shaped "Recoveries"

Courtesy of Doug Short

Note from dshort: I retired this chart series last summer in deference to my prefered inflation-adjusted series that aligns the S&P 500 2000 high with the Nikkei peak in 1989. However, I continue to receive requests for this version, despite the "V" shape of the the recovery since the March 2009 low. This chart series overlays the current S&P 500 with the L-shaped "recoveries" after the Dow Crash of 1929, the Nikkei 225 after Japan's 1989 bubble, and the post Tech Bubble NASDAQ. Click the chart below for a larger version and use the links to see various comparisons.


Click for a larger image

I've ...



more from Chart School

Sabrient

Sabrient Risers - 3/12/2011

Top 5 RisersStockRatingAnalysisVLOSTRONGBUYAn increasingly positive growth rate of past earnings, along with improving expectations for long term growth, make Valero a good prospect for high returns.KROSTRONGBUYKronos Worldwide has been gaining recognition from analysts as a good canditate for achieving higher than expected earnings along with higher overall projected valuation.SFIBUYiStar is one of the top candidates projected to achieve both higher than previously projected earnings in the short run and a higher earnings growth rate in the long run.AMATSTRONGBUYApplied Materials has been...

more from Sabrient

Option Review

Bulls Scoop Up Sprint Nextel Corp. Calls

 Today’s tickers: S, FTR, JTX & SBUX

...



more from Caitlin

OpTrader

Swing trading portfolio - week of March 7th, 2011

This post is for live trades and daily comments. Please click on "comments" below to follow our live discussion. All of our current virtual trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading portfolio (strategy, performance, FAQ, etc.), please click here

Optrader 

Swing trading portfolio

 

One trade portfolio

...

more from OpTrader
 
 

Stock World Weekly

Stock World Weekly

Here's the newest Stock World Weekly:  Illusion Based on a Fantasy 

Comments welcome... share your thoughts. 

Download Newsletter 3/6/11


Stock World Weekly archives here >

...

more from SWW

Pharmboy

Biotech Junkies Update and Momenta Pharma Moving Forward

February is now past, and the Biotech Porfolio is loaded with winners and a miss (PLX).  MRK is down a bit, but I expect that trade to recover, and one could be more agressive and double down on it, or play another round at the Jan13 $30 options for roughly the same price.  Below is the summary, and note the grey boxes are ones that did not fill.  I am still a fan of BMRN, and like DEPO as well.  Now let's look at a few others.

Table 1.  PSW Biotech Plays Since January 2011

 

Our newest play is Momenta Pharmaceuticals (MNTA), who is pursuing a three-part business model which includes complex generic equivalents in partnership with the Sandoz division of Novartis, proprietary compounds, and follow-on- biologics (FOB).  It seems that this company is tied up in competition/litigation wit...



more from Pharmboy



FeedTheBull - Top Stock market and Finance Sites




As Seen On:




About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>

About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the Favorites backup site (blogroll, archives, more). Contact Ilene to learn about our affiliate and content sharing programs.

Favorites Site >>