Today’s announcement from the Conference Board was especially telling as not only did the numbers come in below analyst expectations, but among the key numbers each component declined. In the case of the overall confidence survey, the June figure came in at 49.30, down from 54.80 in May, while the Present Situation component came in at 24.80, down from 29.70.
Understanding, absorbing, and processing the lessons of “markets past” is often one of the key ingredients in putting together a winning investment program and forging a successful investor. While no two economic climates are ever the same, and no two stock markets are ever the same, successful investors tend to have an established historical knowledge that can be employed to help assess complex situations.
While the Dow Jones Industrial Average reached a new rally high in June the Dow Jones Transportation Average did not, with many technicians pointing out the non-confirmation (shown below). Today’s article looks at why the transports have been lagging and whether or not their recent weakness relative to the industrials will continue.
Over the last 10 weeks there can be no question that the capital market ‘herd’ has come storming back into the arena for speculation, on the prowl for signs of global recovery and reflation. The idea underpinning the advance has been to surf the coattails of the market gods, -- the global central banks -- which have been creating liquidity as never before.
Back in April a piece was penned that looked at how oversold the market was on a statistical basis (“Possible vs. Probable”). The basis for the article was to look at the percent deviation of the S&P 500 from its 200 day moving average (200d MA) and how many standard deviations it was below the mean, comparing the current experience to prior bear market sell offs.
Since we began getting cautious on the US Stock Market back on May 12th with the S&P at 912, the index has retained a bullish bias, but has nevertheless largely remained in a range (+/- 30 S&P Index points around 912) with lows in the 880 area and highs in the 940 zone, abutting the January 2009 peak.
The “less bad” economy that started on a technical bounce in March continues to find support from decelerating and up-ticking economic indicators such as consumer confidence, ISM manufacturing and non-manufacturing, new jobless claims, and durable goods. The most important of these is consumer confidence and the follow-through we need to see in retail sales (demand).
While the stock market remains buoyant and optimistic that ‘green shoots’ are starting to take hold within the global economy, the technical side of the equity market now strongly argues for a “go-slow” approach.
Preparation Time: a Few Months
Number of Servings: 1 every 4 years on average
Calories Per Serving: 6% to 59.8% return
Time to cook: 8 to 106 days
Over the years, the adage about “selling May and going away” has actually been very good advice, as stocks have generated the vast majority of their performance in the time period between late November and early May. This year this advice is shaping up to be at the very least a good suggestion, as equity markets have now rallied on a scale not seen since the early 1930’s, when judged on the amount of percentage gain squeezed into a given period of time.