Stock Market Analysis: 06/22/10
How do the companies compare in terms of business models, revenue growth rates, and margins? In a nutshell, the unique boutique market is where investors can buy and sell securities, or stakes in individual companies as well as exchange-traded funds (ETFs). To truly answer that question, we have to first answer the question of why stock prices went down in the first place. Lastly, falling Street EPS estimates in the past few weeks have been a headwind for stock prices. Of secondary consideration is a number of positive seasonal and cyclical patterns for stock prices. Many stocks in the space have picked up even more steam as of late and are significantly outperforming that number. The fear level is a tad on the high side, which doesn't mean that they can't get even higher on negative developments. The high level of insider selling is a concern and something to keep on your radar, but insider buying has historically been a more powerful signal than insider selling. The advance-decline line remains in an uptrend, though it did violate a support level. As well, the map of market leadership remains in the bulls' favor. Indeed, the last time Hulbert sounded the alarm on insider selling was in December 2012, just before the stock market continue to rally to further recovery highs.
Last year's weakness in the long leading indicators has fed through into the short leading and coincident indicators, although there was improvement in many this week. The recent weakness in macro-economic indicators have fed through to falling Street estimates. Fortunately for the bulls, the bout of weakness in high-frequency economic releases may have been overdone. As tempting as they may be, try to avoid them. Because the recent weak consumer spending leads jobs, I expect that job reports in the next several months may be weak. The chart below shows the relative performance of the defensive sectors (in black), which consist of consumer staples, utilities and telecom (health care was not included as sector performance has been skewed by the biotechs, which have been on a tear) against the SP 500. The SP 500 performance is shown for reference in purple. The chart below of the Citigroup Economic Surprise Index (in orange) has retreated to levels where it has rebounded in the past. When that stock levels out in prices, it is called the sign of the stock, and this can be a good platform to purchase so the trader earns good profits when it moves back up, which is the cup section of the pattern.















