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Data point: Kaufman

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  • Data point: Kaufman

    I'm getting more and more cold calls from needy asset managers; one actually had a good enough story I decided to give them a chance.

    They put in into CX based on a combination of TA and anticipated stimulus package windfall.

    Now my views on TA are very clear, but I also can honestly say I've never entrusted any money to "professional" TA traders.

    So that obstacle is now gone - we'll see how they (and CX) does. Certainly the first week was not auspicious (down 10%).

    Along those lines, the TA advisor that is being used: (this is not the asset manager firm),%202009.pdf


    Jethro Tull: Too old to rock and roll, too young to die. Stocks: too late to sell, too soon to buy. That seems to be the recent viewpoint of many investors evidenced by the failed breakout of early January and last week’s action where there was no follow
    through on the breakdown seen on January 20

    We have said since the beginning of the year that this would be a frustrating, infuriating whipsaw market, and so far we haven’t been disappointed. Last week we stressed the following: “With stocks still oversold, options buyers showing pessimism, and valuations based on spreads between bond and earnings yields at very attractive levels, stocks should be able to challenge resistance levels. An inability to do that by the end of next week would probably show that fourth quarter earnings reports were not enough to provide a catalyst to increase investor demand for stocks.”

    We still think that timetable holds true, and with a flood of earnings coming out along with the FOMC meeting Wednesday, this week will tell an important story. Some new positives are a bullish divergence on the percentage of stocks over their 10-day moving averages, a bullish divergence on the Advance Decline line, hammer candlesticks printed on the daily and weekly S&P 500 charts, along with the previously mentioned lack of aggressiveness on the part of sellers after January 20
    th’s breakdown.

    Therefore, we think the table is being set for some type of short-term rally, but a failure to do so could have very bearish consequences. Should we get a rally here we think it will be very selective. Also, keep in mind that we continue to believe that any rallies that do occur are of the bear market variety.

    The short-term, intermediate-term and long-term trends remain down. This continues to be an opportunistic trader’s market, prone to infuriating whipsaws, with adept traders able to take advantage long or short. The long-term downtrend must be respected. Investors should not hesitate to take profits when they get them as market direction changes rapidly and short-term profits can quickly become losses.

    The S&P 1500 (188.57) was up 0.56% Friday. Average price per share was up 0.47%. Volume was 103% of its 10-day average and 125% of its 30-day average. 56.01% of the S&P 1500 stocks were up on the day, with up volume at 69.46% and up points at 60.45%. Up Dollars was 72.74% of total dollars, and was 104% of its 10-day moving average while Down Dollars was 17% of its 10-day moving average. The index is down 7.983% month-to-date, down 7.983% quarter-to-date, down 7.983% year-to-date, and down 47.09% from the peak of 356.38 on 10/11/07. Average price per share is $22.37, down 48.25% from the peak of $43.23 on 6/4/2007.

    The Put/Call Ratio was 0.768. The Kaufman Options Indicator is showing pessimism at 0.87 but may be starting to turn up.

    The spread between the reported earnings yield and 10-year bond yield is 139%, and 218% based on projected earnings
    . The dividend yield on the S&P 500 recently moved above the 10-year bond yield for the first time since 1958.

    Reported aggregate earnings for the S&P 1500 peaked in August 2007 at $19.18 and are now at $11.84, a drop of 38.26%. Estimated aggregate earnings peaked at $21.95 in February 2008 and are now $15.70, a drop of 27.47%.
    The spread between
    reported and projected earnings is now the narrowest since February 2008.

    98 companies in the S&P 500 have reported fourth quarter earnings. According to Bloomberg, 51.0% have had positive surprises, 8.2% have been in line, and 40.8% have been negative, a high number. The year-over-year change has been -95.5% on
    a share-weighted basis, -26.1% market cap-weighted and -25.2% non-weighted. Ex-financial stocks these numbers are -6.7%, +6.9%, and +31.9%, respectively.

    Federal Funds futures are pricing in a probability of 88% that the Fed will
    leave rates unchanged, and a probability of 12.0% of cutting 25 basis points to 0.00% when they meet on January 28th. They are pricing in a probability of 69.8% that the Fed will leave rates unchanged on March 17th, and a probability 21.1% of raising 25 basis points to 0.50%.