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Tuesday, September 20, 2011 1:31:18 PM
What Are Market Indicators Telling Us?
* Tuesday, September 20, 2011
Technical indicators argue in favor of a rally in U.S. stocks, but caution is warranted given the lack of a solution for the euro area debt crisis and clear action to stimulate U.S. growth.
Almost all of our technical indicators suggest that the S&P 500 has reached oversold levels that typically herald a rally. For example, the Composite Technical Indicator has fallen sharply and has reached levels that usually mark the end of major market corrections. The insider sell/buy ratio, which has plunged to levels not far from those seen in late 2008/early 2009, suggests a high level of capitulation among corporate executives. Also, market breadth has collapsed, consistent will a major bottom in a typical cyclical bear market. Meanwhile, our Risk Indicator is lower than it was in 2001, when the S&P 500 fell almost by half. It is rare to have all key indicators simultaneously flashing signals of massively oversold conditions and reduced risk. When this happens, it can only suggest that selling power has almost been exhausted and the market has absorbed a lot of bad news. However, global financial markets will continue to be troubled by the lack of policy options and inaction coming from the G7 at a time of heightened economic uncertainty and financial system fragility. The risk of systemic events remains high. Bottom line: Technical indicators suggest that a rally in risk assets is possible, but the broad environment remains unstable and the risk of policy mishaps is still high. Maintain a benchmark allocation to the S&P 500.
http://www.bcaresearch.com/public/story.asp?pre=PRE-20110920.GIF
George.
Click on "In reply to", for Authors past commentaries.
* Tuesday, September 20, 2011
Technical indicators argue in favor of a rally in U.S. stocks, but caution is warranted given the lack of a solution for the euro area debt crisis and clear action to stimulate U.S. growth.
Almost all of our technical indicators suggest that the S&P 500 has reached oversold levels that typically herald a rally. For example, the Composite Technical Indicator has fallen sharply and has reached levels that usually mark the end of major market corrections. The insider sell/buy ratio, which has plunged to levels not far from those seen in late 2008/early 2009, suggests a high level of capitulation among corporate executives. Also, market breadth has collapsed, consistent will a major bottom in a typical cyclical bear market. Meanwhile, our Risk Indicator is lower than it was in 2001, when the S&P 500 fell almost by half. It is rare to have all key indicators simultaneously flashing signals of massively oversold conditions and reduced risk. When this happens, it can only suggest that selling power has almost been exhausted and the market has absorbed a lot of bad news. However, global financial markets will continue to be troubled by the lack of policy options and inaction coming from the G7 at a time of heightened economic uncertainty and financial system fragility. The risk of systemic events remains high. Bottom line: Technical indicators suggest that a rally in risk assets is possible, but the broad environment remains unstable and the risk of policy mishaps is still high. Maintain a benchmark allocation to the S&P 500.
http://www.bcaresearch.com/public/story.asp?pre=PRE-20110920.GIF
George.
Click on "In reply to", for Authors past commentaries.
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