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Sort of Ted but by going to the horses mouth (THE WSJ) we learned about Disney ). Still your right in that this is a key issue worthy of informing visitors to this site. Who knows two posts might help make a greater impression. I am not selling yet but historically this is an early (possibly too early predictor of a drop. At the very least right or wrong I am not buying the dips till 15%
Market breath peaked in April 1998 before the major decline began in March 2000. And back then it was just a handful of tech stocks that accounted for the big gains in late 98 to the final top. Not sure when breath peaked this time around. The next large decline could be led by the biotechs even if there is no similarity between them in this cycle vs tech stocks in the late 90s cycle. Anyone looked at the chart of Biogen (BIIB) lately?
Indeed, the market breadth is foul at this time. But as Junkster correctly reported, there can be a long time-lag between that signal and a market direction reversal. That indicator, like all others, also generates false signals. But it is a cautionary warning and merits some monitoring.
The Advance-Decline line is one of many statistics that market gurus have identified to project potential future market direction change. Interestingly, another market monitor also commented on it recently. Here is a Link to the article in The Irrelevant Investor:
The article concludes with a pertinent overarching warning as follows: “The reason I went through this exercise is not to debunk the importance of market breadth or to say that the lack of participation in today’s market should be swept under the rug. What I’m always trying to do is dig a little deeper and challenge people who draw lazy conclusions using single data points.”
The marketplace is too complex to be easily characterized by any single parameter. I have often used this quote from H. L. Mencken in earlier posts, and it is appropriate here: “For every complex problem there is an answer that is clear, simple, and wrong”.
In this instance, the “wrongness” of the Advance-Decline criterion is that it is not sufficient as a standalone predictor. It is best exploited when combined with other signals. Those other signals are many. For instance, GDP Growth rate, Investor Sentiment, the projected P/E ratio, and the Presidential cycle to name just a few.
Also context is important. For example, the inverse of the standard P/E ratio (E/P) should be compared to the current yield of the 10-year Treasury bond to weigh the attractiveness of equities against bonds in a relative way to perhaps adjust portfolio asset allocations.
Many financial advisors deploy a multi-dimensional Bear market criteria to recommend the level of equity commitments to their clients. One of my favorite advisors is Jim Stack, owner of InvesTech Research. Here is a Link to a paper that he cobbled together for the most recent MoneyShow in Las Vegas:
Please access the detailed reference by hitting the download PDF button.. The Advance-Decline line has deteriorated since Stack wrote that paper.
The assembly of Bear market warning signals has not yet crossed my action threshold. My portfolio remains broadly diversified. If the warning “red flags” continue to rise, I will incrementally move out of equities. I will always hold some equity positions since none of the composite indicators are perfect. Nothing ever is.
Market breath peaked in April 1998 before the major decline began in March 2000. And back then it was just a handful of tech stocks that accounted for the big gains in late 98 to the final top. Not sure when breath peaked this time around. The next large decline could be led by the biotechs even if there is no similarity between them in this cycle vs tech stocks in the late 90s cycle. Anyone looked at the chart of Biogen (BIIB) lately?
Poor quarter/guidance. AMGN, GILD and CELG all had good/very good quarters. Considerable discussion that AGN may bid for BIIB, ABBV or AMGN.
Hi @MJG and all. This house reviews and watches technical data, too.
The investment markets remain perverted from many directions and factors.
Some central banks are looking for inflation and can't find it, while others are concerned with deflation (selling their products). The CB's keep tweaking this and that; looking for a favorable outcome. Regardless of mounds of data, forward policy(s) changes by CB's may be not much more than a "best guess" regarding outcomes. Lots of hot money is everywhere and in the hands of the big houses and the machines. Debt at the public, corporate, private, muni; among others is at a staggeringly high level.
Whatever one perceives as an investment normal from the past may remain nothing more than a reference point on a chart that may not be valid in today's investment world.
Our investment house is up the creek, but still with both paddles, to help guide a path.
The investment markets remain perverted from many directions and factors.
I think that sums it it for the foreseeable future.
Fundamental and technical analysis are out the window. Macro - Fed and Gov't actions/perceived are what will rule the markets. Stock market wise expect slow or flat. There will be sectors of course - real estate, health - that will do well.
Comments
Regards,
Ted
http://www.mutualfundobserver.com/discuss/discussion/22759/market-is-thinning-out#latest
My wife told me the same thing this morning. Must have been the onions in the pizza last night.
Derf
Indeed, the market breadth is foul at this time. But as Junkster correctly reported, there can be a long time-lag between that signal and a market direction reversal. That indicator, like all others, also generates false signals. But it is a cautionary warning and merits some monitoring.
The Advance-Decline line is one of many statistics that market gurus have identified to project potential future market direction change. Interestingly, another market monitor also commented on it recently. Here is a Link to the article in The Irrelevant Investor:
http://theirrelevantinvestor.tumblr.com/post/125442897978/breadth-and-major-market-tops
The article concludes with a pertinent overarching warning as follows: “The reason I went through this exercise is not to debunk the importance of market breadth or to say that the lack of participation in today’s market should be swept under the rug. What I’m always trying to do is dig a little deeper and challenge people who draw lazy conclusions using single data points.”
The marketplace is too complex to be easily characterized by any single parameter. I have often used this quote from H. L. Mencken in earlier posts, and it is appropriate here: “For every complex problem there is an answer that is clear, simple, and wrong”.
In this instance, the “wrongness” of the Advance-Decline criterion is that it is not sufficient as a standalone predictor. It is best exploited when combined with other signals. Those other signals are many. For instance, GDP Growth rate, Investor Sentiment, the projected P/E ratio, and the Presidential cycle to name just a few.
Also context is important. For example, the inverse of the standard P/E ratio (E/P) should be compared to the current yield of the 10-year Treasury bond to weigh the attractiveness of equities against bonds in a relative way to perhaps adjust portfolio asset allocations.
Many financial advisors deploy a multi-dimensional Bear market criteria to recommend the level of equity commitments to their clients. One of my favorite advisors is Jim Stack, owner of InvesTech Research. Here is a Link to a paper that he cobbled together for the most recent MoneyShow in Las Vegas:
http://www.forbes.com/newsletters/investech-research/2015/05/01/investech-research-newsletter-may-1-2015-like-watching-paint-dry/
Please access the detailed reference by hitting the download PDF button.. The Advance-Decline line has deteriorated since Stack wrote that paper.
The assembly of Bear market warning signals has not yet crossed my action threshold. My portfolio remains broadly diversified. If the warning “red flags” continue to rise, I will incrementally move out of equities. I will always hold some equity positions since none of the composite indicators are perfect. Nothing ever is.
Best Regards.
press
This house reviews and watches technical data, too.
The investment markets remain perverted from many directions and factors.
Some central banks are looking for inflation and can't find it, while others are concerned with deflation (selling their products). The CB's keep tweaking this and that; looking for a favorable outcome.
Regardless of mounds of data, forward policy(s) changes by CB's may be not much more than a "best guess" regarding outcomes.
Lots of hot money is everywhere and in the hands of the big houses and the machines.
Debt at the public, corporate, private, muni; among others is at a staggeringly high level.
Whatever one perceives as an investment normal from the past may remain nothing more than a reference point on a chart that may not be valid in today's investment world.
Our investment house is up the creek, but still with both paddles, to help guide a path.
Good luck to all with the investments.
What a game, eh?
Catch
Fundamental and technical analysis are out the window. Macro - Fed and Gov't actions/perceived are what will rule the markets. Stock market wise expect slow or flat. There will be sectors of course - real estate, health - that will do well.