June 9th, 2009

Wringing Hands and Spinning Wheels

I don’t know about you but this market bores me. O.K., we had a great run of 35+% from the market lows but the only thing that happened was the market recovered from a drastically oversold, panic level (easy to say now in retrospect, I know). We sometimes lose sight of the fact that at current levels the market is exactly where it was 7-8 months ago. While we’ve been wringing our hands, we’ve been spinning our wheels.

Probably the most interesting aspect of the market’s recent performance doesn’t have anything to do with the level of the Index – it’s the evaporation of volume. The index has barely moved for about a month and during that time, daily volumes have declined. What makes that even more interesting is that the Index didn’t swell as expected it might when it crossed above the 200-day moving average, the indicator many technicians anticipated to be a buy signal.

The Index has declined a mere 1.57% between October 31 and yesterday’s close. But under the surface, more stocks (57%) performed better than the Index and most of that did (50%) were less than $12/share. The key to making money over the past seven months was in those low priced, beaten down stocks. Here’s a breakdown by industry group:

While all the technical indicators clearly indicate that a bottom is near completion, I’m just waiting for the market to decide whether the next momentum drive will be to the upside or down. My bet is it will be up …. just can’t say when.

Subscribe below or click here to learn more about help for navigating turbulent markets.