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MARKET TREND IS STILL UP, BUT...
Chart Spotlight
by Carl Swenlin
DecisionPoint.com
March 31, 2006
The overall trend of the
market is still up, but there are very few new opportunities surfacing.
Taking a look at our primary mechanical timing models below, we can see
that nearly all of the broad market and sector indexes are on profitable
buy signals, but most of the signals are relatively old and do not offer
ideal conditions to put new money to work.
Days Index 03/31 Points Percent Index Posture Date Elap @Start Close P/L P/L ------------------- ------- -------- ---- ------- ------- ------- ------- S&P 500 BUY 11/04/05 147 1220.14 1294.83 +74.69 +6.1% Dow BUY 11/07/05 144 10586.23 11109.32 +523.09 +4.9% Nasdaq 100 Neutral 02/13/06 46 1645.83 1703.66 .... .... S&P 100 BUY 11/07/05 144 563.30 587.75 +24.45 +4.3% S&P Equal Wt (RSP) BUY 11/04/05 147 160.84 176.40 +15.56 +9.7% S&P 400 MidCap BUY 11/07/05 144 715.78 792.11 +76.33 +10.7% S&P 600 SmlCap BUY 11/10/05 141 347.03 394.83 +47.80 +13.8% Wilshire 5000 BUY 11/09/05 142 12227.02 13155.42 +928.40 +7.6% Consumer Disc (XLY) BUY 11/01/05 150 31.66 33.76 +2.10 +6.6% Consumer Stpl (XLP) BUY 03/01/06 30 23.53 23.69 +0.16 +0.7% Energy (XLE) BUY 03/29/06 2 54.56 55.17 +0.61 +1.1% Financial (XLF) BUY 11/02/05 149 29.95 32.54 +2.59 +8.6% Health Care (XLV) BUY 11/10/05 141 30.47 32.16 +1.69 +5.5% Industrial (XLI) BUY 11/07/05 144 29.80 33.81 +4.01 +13.5% Materials (XLB) BUY 10/31/05 151 27.13 32.66 +5.53 +20.4% Technology (XLK) BUY 11/07/05 144 20.75 22.27 +1.52 +7.3% Utilities (XLU) Neutral 03/24/06 7 31.55 31.06 .... .... Another problem is that, while the signals are showing a profit, in many cases (like the S&P 500) the profit is rather narrow for the age of the signal, and much of it would be lost if the trend were to change. (It takes about 3% to 4% to generate a signal change.) Nevertheless, I am pleased with how the models have been performing under the circumstances. The problems reflected by the timing models is also evident in the following chart of the S&P 500. We can see that the trend has been up since the price low in late October; however, the index has been stalled by the resistance at the top of the shallow rising trend channel, which could continue to impede progress for some time to come. And, even in the context of the rising trend channel, prices are due to correct back to at least the bottom of the channel, and that is not a situation that invites renewed risk taking.
While prime opportunities may be few, there are two worth considering. First, the S&P Energy Sector has generated a new buy signal after a short correction. Note that it is bouncing up off the bottom of a rising trend channel.
Also Interesting is the Nasdaq 100 Index. It still failed to pass all the screens necessary to generate a new buy signal, but it is very close to doing so. It too is bouncing off the bottom of a rising trend channel.
While both charts are promising, they represent the modest opportunities found after a correction in an established rising trend. They are not likely to result in the kind of gains we see from deeply oversold bear market lows. It is especially interesting that the Nasdaq 100 is looking positive at this time. It could provide the required push to keep the broader market rising for a while longer. I must emphasize, these are not recommendations, and the timing signals are not infallible.
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