Thursday, April 13, 2017 6:21:32 PM
Hi Allen, Re: Market Breadth Graph.............
Here's what that same graph looked like back in October of 2008 (as scary as any Halloween we've ever experienced!)
VS
It's certainly the tale of two different periods in history! Here's what I happened to have said in my weekly commentary back then:
10/2008
This is the final act in a play called "It seemed like a good idea at the time." Stars in the play are current and former members of the legislature along with stand up comic and sax player Billy C. While the storyline could be considered a tragedy by some it could also be considered a comedy by others. To say that EVERYONE has been moved by this play is not an overstatement.
Even looking back over the last month or two it is hard to understand just how far fear has carried this market. Election turmoil, bank liquidity, mortgage dislocation and "negative spin" by most major news agencies have turned a reasonable economy into a circus and a "cliff hanger" into a cliff diver. If there's good news to be drawn from all of this it is twofold. 1) Weak hands have been burned and will be slow to return to the market. 2) all of the recent past has added onto the "wall of worry" which most investors will have to climb going forward. This should make for a healthier overall market going forward.
While not all is settled and not all can be known about the effect of government money being involved in the banking business, there is an apparent world wide calming that is taking place. As I look over the various Exchange Traded Funds we use in our portfolios I see a much more orderly market in every corner of the globe. The ease of selling and high level of liquidity allowed short term speculators to empty their accounts of equities around the world but not without some serious collateral damage. However, now that the selling seems to have abated to a degree cautious long term investors are using their own reserves add to their own holdings.
By the week of Nov 3rd, 2008 my "market risk indicator" called the i-Wave at the time, hit a new all time low and one that requires some understanding. It crossed below Zero Cash Reserve into negative territory for the first time since it started in 1982. All four of my i-Wave components were deeply into their own Bullish territories as was the i-Wave overall.
By the first of December, 2008 my i-Wave was saying one should be carrying a margin balance equal to 9% of the equity value. Yes, a negative 9% Cash Reserve! It wasn't until mid-January, 2009 that the IW finally came back to zero cash reserve indicated. It didn't stay there long, however. It dipped back to negative indicated cash reserve through mid-March, 2009.
Taking the idea of "Cumulative Breadth" from Barron's I created a graphic from the i-Wave data and called it Cumulative Risk. It shows the cumulative risk peaking in late 2007. Note the very steep decline fron late in 2008 to the last date. Risk was truly "evaporating" before my eyes. It seemed in the midst of all this panic that we were being offered one of the best opportunities equity investors had seen in decades.
I should update that graph sometime.
Here's what happened to Consumer Spending:
Even Janet Yellen commented that the California FED had seen record inflows of coins in early 2009. People were literally breaking into their piggy banks for quarters, nickels, dimes and pennies. If you take the Consumer Spending graphic and invert it, that was what was happening to Consumer Savings! The financial Media didn't talk about that side of this issue. I don't think it was a big topic at the FED, either. Where the U.S. public had been criticized for spending beyond their means, nobody made a peep when the public did this about-face and started SAVING.
By the first week in February I was urging anyone and everyone I knew to write to the SEC and request the immediate restoration of the "Up-Tick Rule" about short selling. It had been removed by them after 70 years in mid-2007. Need I say more?
Finally by June of 2009 some light was getting through the tunnel of gloom. Here's Cumulative Breadth from Barron's at that time:
It shows the number of advancing stocks clearly outnumbering declining ones quite strongly after March, 2009.
So, I think there are plenty of sources of good information around. I have noted recently that the CNBC gang has started to give more air time to Perma-Bears. We can only hope this gets the weak hands out of the market so that we longer term investors can get on with things.
Here's what that same graph looked like back in October of 2008 (as scary as any Halloween we've ever experienced!)
VS
It's certainly the tale of two different periods in history! Here's what I happened to have said in my weekly commentary back then:
10/2008
This is the final act in a play called "It seemed like a good idea at the time." Stars in the play are current and former members of the legislature along with stand up comic and sax player Billy C. While the storyline could be considered a tragedy by some it could also be considered a comedy by others. To say that EVERYONE has been moved by this play is not an overstatement.
Even looking back over the last month or two it is hard to understand just how far fear has carried this market. Election turmoil, bank liquidity, mortgage dislocation and "negative spin" by most major news agencies have turned a reasonable economy into a circus and a "cliff hanger" into a cliff diver. If there's good news to be drawn from all of this it is twofold. 1) Weak hands have been burned and will be slow to return to the market. 2) all of the recent past has added onto the "wall of worry" which most investors will have to climb going forward. This should make for a healthier overall market going forward.
While not all is settled and not all can be known about the effect of government money being involved in the banking business, there is an apparent world wide calming that is taking place. As I look over the various Exchange Traded Funds we use in our portfolios I see a much more orderly market in every corner of the globe. The ease of selling and high level of liquidity allowed short term speculators to empty their accounts of equities around the world but not without some serious collateral damage. However, now that the selling seems to have abated to a degree cautious long term investors are using their own reserves add to their own holdings.
By the week of Nov 3rd, 2008 my "market risk indicator" called the i-Wave at the time, hit a new all time low and one that requires some understanding. It crossed below Zero Cash Reserve into negative territory for the first time since it started in 1982. All four of my i-Wave components were deeply into their own Bullish territories as was the i-Wave overall.
By the first of December, 2008 my i-Wave was saying one should be carrying a margin balance equal to 9% of the equity value. Yes, a negative 9% Cash Reserve! It wasn't until mid-January, 2009 that the IW finally came back to zero cash reserve indicated. It didn't stay there long, however. It dipped back to negative indicated cash reserve through mid-March, 2009.
Taking the idea of "Cumulative Breadth" from Barron's I created a graphic from the i-Wave data and called it Cumulative Risk. It shows the cumulative risk peaking in late 2007. Note the very steep decline fron late in 2008 to the last date. Risk was truly "evaporating" before my eyes. It seemed in the midst of all this panic that we were being offered one of the best opportunities equity investors had seen in decades.
I should update that graph sometime.
Here's what happened to Consumer Spending:
Even Janet Yellen commented that the California FED had seen record inflows of coins in early 2009. People were literally breaking into their piggy banks for quarters, nickels, dimes and pennies. If you take the Consumer Spending graphic and invert it, that was what was happening to Consumer Savings! The financial Media didn't talk about that side of this issue. I don't think it was a big topic at the FED, either. Where the U.S. public had been criticized for spending beyond their means, nobody made a peep when the public did this about-face and started SAVING.
By the first week in February I was urging anyone and everyone I knew to write to the SEC and request the immediate restoration of the "Up-Tick Rule" about short selling. It had been removed by them after 70 years in mid-2007. Need I say more?
Finally by June of 2009 some light was getting through the tunnel of gloom. Here's Cumulative Breadth from Barron's at that time:
It shows the number of advancing stocks clearly outnumbering declining ones quite strongly after March, 2009.
So, I think there are plenty of sources of good information around. I have noted recently that the CNBC gang has started to give more air time to Perma-Bears. We can only hope this gets the weak hands out of the market so that we longer term investors can get on with things.
Best regards,
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
