Tuesday, June 9, 2015

We are in a BS Market - But NO Time to Panic

What do I mean by a BS market?  Its a market where the CEOs are spending more time improving the Balance Sheet and Cash Flow statements then they do on the Income Statements.

We can only work on the Balance Sheets and Cash Flow statements so long and for the market to keep going up we need to work on the Income Statements with increases in Revenue and Earnings.

I'm sorry but I think the talking heads on CNBC, Fox Business and Bloomberg have it all wrong.  They keep saying we are headed for doom but I don't believe that.  We are at a high point in the market, for sure and lots of  the big companies aren't investing in capital expenditures for growth and they are either sitting on cash, retiring debt or buying back their stock.  But the market isn't as bad as it seems.

They are pointing out that 58%+ of the stocks are trading below their 20 day moving averages and 55%+ are trading below their 100 day moving averages but how bad are we really?

My proxy for the market is the Value Line Arithmetic Index, 1700 of the biggest companies making up around 95% of the entire market capitalization.  OK, presently it has a 16% Barchart technical sell signal and a Trend Spotter sell signal but it's only off its previous high by 2.67%!  Is that a reason to panic?  Barchart computes a technical support level for the Index at 4784.17 and it's trading at 4807.08.  Look at the chart of the moving averages and tell me if you see gloom and doom?


In addition, the latest report on Conference-Board.Org have both the leading and coincident economic indicators on the rise.  Let's look at the 5 most popular stocks with the readers of Seeking Alpha and see if you agree.  None of them are trading even 10% off their recent high.

Apple (AAPL)


Barchart technical indicators:
  • 8% Barchart technical sell signals
  • Trend Spotter hold signal
  • Below its 20 and 50 day moving averages but above its 100 day moving average
  • Only 5.98% off its recent high
  • Relative Strength Index 41.45
  • Barchart computes a technical support at 125.57
  • Recently traded at 126.56 which is below its 50 day moving average of 128.04


Barchart technical indicators:
  • 100% Barchart technical buy signals
  • Trend Spotter buy signal
  • Above is 20, 50 and 100 day moving averages
  • 6 new highs and up 4.92% in the last month
  • Relative Strength Index 66.74%
  • Barchart computes a technical support level at 16.87
  • Recently traded at 17.27 with a 50 day moving average of 16.17


Barchart technical indicators:
  • 16% Barchart technical buy signals
  • Trend Spotter hold signal
  • Below its 20 day moving averages but above its 50 and 100 day moving averages
  • Only 4.65% off its recent high
  • Relative Strength Index 52.78%
  • Barchart computes a technical support level at 27.12
  • Recently traded at 27.34 with a 50 day moving average of 26.39
Facebook (FB)


Barchart technical indicators:
  • 8% Barchart technical buy signals
  • Trend Spotter buy signal
  • Below its 20 and 50 day moving averages buy above its 100 day moving average
  • Only 6.62% off its recent high
  • Relative Strength Index 8.49%
  • Barchart computes a technical support level at 79.06
  • Recently traded at 80.20 with a 50 day moving average of 80.92
Microsoft (MSFT)
  • 0% Barchart technical buy signals
  • Trend Spotter hold signal
  • Below its 20 day moving averages but above its 50 and 100 day moving averages
  • Only 8.73% its recent high
  • Relative Strength Index 41.64%
  • Barchart computes a technical support level at 45.18
  • Recently traded at 45.68 with a 50 day moving average of 45.40
My Conclusion:  Am I cautious - YES.  Am I in panic - NO!.  I will sell any individual stock that drops 10% off its recent high and wait till the market has a better sense of direction before I replace that stock.  Learn from the carpenter that measures twice before he cuts once,








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