FYI All - Weekly Market Comment from Thomson MarketEdge. ( I have found their daily commentary on stock, bond and FOREX markets to be excellent)
Weekly Market Comment
09:28am EST 9-Jan-97
The new year has already demonstrated tremendous intraday volatility and we believe it will prove to be more volatile than 1996. This year brings with it a tremendous amount of historical baggage: years ending in 7, post election years, post-presidential reelection years, and years following two years of outsized market gains have all had terrible track records. Other disturbing Wall Street trivia include things such as the largest percentage of the Forbes 400 richest Americans acquired their wealth through the stock market (versus oil in the 1970's, real estate in the 1980's), Americans have more assets in stocks than real estate for the first time since the late 1960's, $775 billion has flowed into equity mutual funds in the last six years and an estimated record 95% of household savings flowed into equity mutual funds in 1996. But so far 1997 has fared well. The first five days of the year have recorded a gain of 101 points, or 1.6%, which bodes well for the overall January performance which would be a good omen for the year. Despite our negative outlook we hope this proves true.
What is clearly working against our cautious view currently is the undocumented, yet telltale, signs of foreign buying. Foreign buying is first detected in daily trading by strong market openings and closings. And we can tell through conversations with foreign clients that they no longer shun U.S. securities, are under client pressure to account for their low U.S. exposure, and are belatedly dipping in. Alas, we believe it is the wrong time with the SPX trading at 18.8x trailing and 17.8x year end 1997 operating earnings.
Technical Scoreboard
Breadth: Mixed
The A/D line confirmed the DJIA's new high on Tuesday. Breadth oscillators remain neutral; failure to reach overbought when the DJIA makes a record high indicates a lack of momentum. The 10-day average of new highs remains positive at 128. Volume has accelerated this week, but the 10-day average of 338.6 million shares remains well below the 200-day average of 408 million shares.
Sentiment: Mixed
The specialist short sale ratio slipped from 38.0% to 37.5% and remains neutral. The speculative index rose from -1.5% to +1.3% and is also neutral. Investors Intelligence sentiment has returned to "normal": 4-week bullishness fell to 48.5% after reaching 53.4% 4-weeks ago and bearishness increased from 31.3% to 31.7% this week. The call/put premium ratio is at an extremely negative 2.77 this week, off imperceptibly from 2.79 last week.
Liquidity: Negative
ICI should be releasing an estimate for December mutual fund flows this week; AMG Data indicates that flows may be flat to negative. Money market fund assets fell from $913.23 billion to $898.61 billion this week. |
