Hi Kevin, As a group, we have all developed strong chest muscles from the ribbing we take here on this thread, but here's not been much in the way of bad behavior.
There's nothing like the feeling of knowing one's Cash Reserves are fully funded when the market's acting top-heavy. In the last few weeks there's been an abundance of new Highs on the NASDAQ. That's the good news. The bad news is that the number of new lows is also growing. Mr. Fosback's "High/Low Logic Index" shows us that with large numbers of new highs and lows simultaneously its likely that the short term market potential is bearish. It shows confusion in the marketplace, rotation and "worry" which have historically been "bad" on a very short term basis.
His studies were done on the NYSE. I've used his formulae for the NASDAQ and have found it also instructive. It's not a perfect measure, but is very good at bullish times, uninformative in neutral times and okay in bearish ones.
We've all been reading about the lack of "Market Breadth" in recent times. The Hi/Low Logic Index helps to confirm this in a different manner. It also points out that there's getting to be a sizable pool of stocks that could be considered "undervalued." This has been going on for a year or more. Nobody's wanted to think about "Value Investing" for a long time, mainly because it hasn't shown very good results compared to the major indexes. In the mean time, Value Line's P/E ratio has fallen from the high teens to 13.7 this last week. We haven't seen that number this low in a very long time. If money starts to spread out towards these lower P/E stock, it could keep this Bull alive for a long time.
Where will the "money" go when the market stalls or takes a breather? I don't know. As the markets themselves have shown us in recent weeks, that money is rather fickle and moves pretty fast. Nobody wanted DOW stocks - until yesterday. However, by day's end, nobody was sure they still wanted them! Well, at least the brokers are making money on such moves!
Best regards, Tom |
