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Sunday March 9, 2008
The Markets Last Week
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Closing prices week ending (3/7/08) vs
week ending 2/29/08)
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The DOW 30 closed back under the 13,000 level for 45 straight days
The SPREAD closed at a discount to the high of -23.57
percent
More than a 20 percent loss is a definition of a
bear market
The DOW 30 (11,893.69) (a new 52 week
low), closed at a new record high of 14,164.53 on 10/9/07 but no more new highs since. Friday's close is off - 2270.84 (-16.03%) from
the high, and also off - 1371.13 (-10.34%) on the year.
The index broke
the 14,000 mark, on 7/19/07, for the first time ever, but failed to hold more than a day, returning back under
the level for 49 trading days before moving back over and closing at 14,164.53, on 10/9/07, the record high. The
index has now closed under the 14,000 level for the last 100 straight trading days.
The index under
the 13,000 level for the last 40 trading days.
The 52 week
low is 11,893.69,
set on 3/7/08. The 52 week and all-time high is 14,164.53, set on 10/9/07. It took 5 years to start setting new all-time highs again. Next
support is the 11,070
level followed by the 10,500
level.
The Nasdaq index
(2212.49)
finished the week off - 58.99 (-2.60%) on the week and off
- 58.99 (-2.60%) on
the month. The 52 week high is 2811.61, set on 10/9/07. Next support is the 2250 level followed by the 2150 level. The Nasdaq set a new 52 week low again today.
This past week,
the SPREAD finished the week at 1192.99, off - 45.80 (-3.70%)
and off
- 45.80 (-3.70%) on the month. The SPREAD fell back to negative territory for the year 13 weeks ago and is now off - 151.33 (-11.27%)
on the year.
The SPREAD is the difference between the close on
the NY and the close on the VL.
Both are basically the same market, with the only exception being about 250
OTC stocks
in the VL (the rest, about 1500, are NY listed).
It tells us how the two separate markets are currently acting
with the VL leaning slightly to the OTC market.
The graph below shows the closing indices on (9/21/01),
the end of the
first full week of trading after the Attack on America, hitting the
lowest point in the markets for almost three years until all
the indices broke the lows again on October 9, 2002.
The week ended with
all 11 indices trading higher than 9/21 vs 11 last week and 11 the week before.
The below table shows the 52 week low, when it expired,
the point difference
and the % over that low, at the closing price on the week.
The above table
shows 0 indices
with more than 30%
to fall last week before breaking the 52 week low, versus 0 two weeks ago and 0 three week ago. Currently, there are 0 indices with more than 20% to fall vs 0 two weeks ago and 0 three week ago. There is 0 indices with more than 10% to fall before breaking
the 52 week low, versus 0
two weeks ago and 1
three week ago (more bearish).
The below figures are % change from closing
year-end indices
and cover this past week versus the week before.
There are 11 indices finishing in negative
territory "year-to-date" this past week versus 11 the week before and 10 three weeks ago. The NY index is off - 10.92%, with a difference of off - 2.94% on the week, while the VL is off - 11.23%, a difference of off - 3.25%. This tells us the blue chips outperformed the big OTC stocks for week 5 after
stronger OTC stocks for 3 weeks after stronger blue chips for 3 weeks (more bearish).
The markets
tend to climb when the VL beats the NY, meaning the current stronger NY would be considered near term bearish.
The difference
between these two indices is the SPREAD. The SPREAD climbs
when the VL is climbing faster than the NY, and falls when the VL falls faster than the NY. The VL tends to lean
more toward the direction of the Nasdaq index, or we should say, the big OTC stocks.
The SPREAD is
"unique"
to the Stocks in the Spotlight since we designed it in 1990 by producing an "equal weighted value equation"
allowing a better view of the longer term markets when comparing the big OTC stocks to the New York Exchange listed
stocks. The SPREAD has been adjusted for the big change of the New York index at the beginning of 2004.
The OTC stocks carried in the VL (the only part of
the "SPREAD (NY vs VL)" with
OTC stocks in it) are only a couple of hundred of the top OTC stocks, because the majority
of the stocks in the VL are NY listed, and none are smaller caps. This means when the VL
performs better than the NY it shows more buying in the top OTC stocks, or vice versa.
The below figures are the discount
to the 52 week
high and cover this past week versus the week before.
All the the indices
set a new 52 week high, on the same day, 44 weeks ago, 04/25/07, but not since. There were no new 52 week highs
this past week.
There are 11 indices with a "double
digit" percentage discount to the 52 week high (a
definition of a correction) vs 11 the previous week and 10 the week before. There are 4 indices in bear market territory (a discount to the 52 week high over 20 percent)
vs 2 last week
and 0 the week
before.
When we see
indices setting new 52 week highs, we get a look at the shorter picture. However, the discount to the "all-time high" (below)
will continue to show the results of the longer term market.
More
than a 10
percent discount to the 52 week high is "one" definition of a correction.
More
than a 20
percent discount to the 52 week high is "one" definition of a bear market.
The below figures are the discount to the all-time high
compared to this past weeks close.
More than a 20 percent discount to the all-time high is another definition of a bear market.
Using this definition,
there are currently 5
indices in bear market territory compared to 2 two weeks ago and 2 three weeks ago.
There were no
new all-time
highs this past week. Twenty two weeks ago there were new all-time highs on the DJI,
XMI, OEX & NY. There was a new all-time high 42 weeks ago on all the
indices, except the Nasdaq,
but with a discount of near -50% to the all-time high, no one was expecting one.
Rising oil prices
are not good and, since they keep climbing, we are seeing a bigger jump in inflation. Since everyone uses oil in
one way or another, higher prices means less money at the end of the month. The price for a barrel of oil has closed
over $80 for week 22, over 90 for 4 week and over $100 for week 2.
We have to worry
about inflation, a recession and a continued slowing in the housing market. Sub-prime mortgages are only a part
of the problem, although a big part, as the industry has so many arms and legs that reach so many sectors of the
economy. Something has to give and it seems to be the bull market. All 11 of the indices are currently in correction
territory.
Remember, there
is no such thing as seeing a correction/bear market coming. They are usually in full force before we know what
hit us. Continue to be cautious.
The problems
that face the economy have not gone away and the day to pay Paul back has already started.
The markets
were very confused, but seemed to have figured which way to go, down, and appears to be heading that way, more.
There are no short fixes. It will take time for the housing markets to settle and it will be a rough road for awhile.
We have to look
ahead because once the investor gets cold feet much of the damage is already done. We need to face the fact that
the markets are very tired and a sizable correction is long overdue. In my opinion, it has started and we still
have a long way to go before we find a bottom.
Use caution, look to small stocks and buy the bargains!
Be sure to visit "The Week Ahead" for
comments about the
current market and what to look for this coming week.
Clicking on "The Week Ahead" will take you there!
Be sure to visit "Monthly Gains & Losses"
for a look at the
past "monthly" performance on the indices going back to 1994.
Clicking on the "Index Gains & Losses" will take you there!
Be sure to visit our "Spotlight Futures" for a look at
metals, oil and currency futures updated weekly.
Clicking on the "Spotlight
Futures" will take you there!
Be sure to visit our weekly "Stocks to Watch" section
for brief news headlines and updated buy, sell, hold
opinions on several Spotlight favorites from the past.
Clicking on the "Stocks To Watch"
will take you there!
"If in the right stock, at the right price,
the market direction will mean little!"
There is still many
negatives in the economy, and the markets, so continue to use caution and stick with value stocks for safety. Stay
with PUTS to protect profits. Choose wisely!
I am J.R. Budke and this is my opinion!
| The recommendations and updates in this week ahead may include "forward-
looking" statements as that term is defined in the Private Security Reform Act of 1995, & therefore are
subject to various risks & uncertainties. There can be no assurance that actual results, business conditions,
business developments, losses & contingencies, and local & foreign factors will not differ materially from
those suggested in the "forward-looking" statements as a result of various factors, including market
conditions, competition, advances in technology, acquisitions, potential litigation, personnel changes, capital
availability, and all sorts of other factors. Do not make investments based on the material provided in this article.
Investors should not make decisions based on any of the material featured here without first consulting with their
brokers and/or financial advisors. |
J.R. Budke was a stock broker from 1981 to 2000, an options principle
since 1982 and a branch office manager since 1987. JR became inactive as a stockbroker on 12/31/99. J.R. writes
most of the articles and opinions for the Stocks in the Spotlight. The
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