Friday, April 04, 2008

Themes and Thoughts for Friday

Tracking a Bottoming Process - These charts from the very useful Decision Point site show how we've been making an intermediate-term bottom in stocks. The top chart shows that, as we dipped a second time in the NYSE Composite in March, the number of common stocks registering new 52-week lows contracted meaningfully. The bottom chart shows that the percentage of NYSE stocks closing above their 200-day moving averages went below 20% in both January and March and is now on an upswing. With Tuesday's rally, money finally began flowing into shares in a significant way. We're now registering overbought in my Cumulative Demand/Supply indicator (Demand and Supply are tracked daily in my Twitter posts), so a period of consolidation following the market strength would not be surprising.

Stocks With Energy to Spare - It's very interesting to see that over 27% of the stocks showing up on Charles Kirk's screens are energy issues. The energy and materials themes have been quite durable, even through the period of market weakness, as the falling dollar, rising commodities, and anticipation of continued long-term demand from emerging nations provide solid fundamental support. See also some of the themes tracked in Kirk's recent links, including gold and utilities.

Visualizing the Market - Shout out to Trader Mike, who dug up this very worthwhile heat map of sectors and asset classes. At a glance, you can see what's weak and strong and infer some of the themes in the market. Great concept.

More Good Reading - Abnormal Returns finds more interesting themes, including a possible bottoming of interest rates, what unemployment claims are telling us, and alternative investments.

Who Makes It - There's a very accurate predictor of trader success I've found as a trading coach. The successful ones work as hard at figuring out and understanding markets as I do. If I work quite a bit harder at the markets than the traders I'm coaching, they're not going to make it. I suspect that's true of players and coaches in sports as well.