A Few Stock Market Perspectives

* No Panic - A look at the average high-low trading ranges for the S&P 500 Index (SPY) over a moving five-day period (top chart) shows increased volatility on market declines. We've seen a jump in volatility of late, but nowhere near the levels seen in August, 2007; January, 2008; or March, 2008. This mirrors the VIX, which, at about 25, is well below the levels from those prior bottoms. It also mirrors sentiment data, as noted recently.

* Not a Good Decade for Stocks So Far: I took a look at the returns of the CPI-adjusted Dow Jones Industrial Average from 2000 to the present. The nominal Dow is down around 200 points--about 2%. On an inflation-adjusted basis, however, the Dow is down 23%. As a hedge against inflation, stocks have not been cutting it. With housing now retracing the gains of the past several years, two important pillars of wealth accumulation appear to have toppled.

* Not Much Discretionary Income: With stocks and housing in retreat and more income going to basics such as food and gasoline, it's not surprising that consumer discretionary stocks (bottom chart) have been making new lows. As you can see from the advance-decline line specific to the S&P 500 issues in the consumer discretionary sector (XLY), it's been a steady downtrend.

* Relative Sector Strength: Here are several S&P 500 sectors and the percentages of their stocks that are above their 200-day moving averages:

CONSUMER DISCRETIONARY - 11%
CONSUMER STAPLES - 29%
ENERGY - 87%
FINANCIAL - 9%
HEALTH CARE - 38%
INDUSTRIAL - 24%
MATERIALS - 31%
TECHNOLOGY - 20%
UTILITIES - 48%

The credit situation and recessionary environment are clearly weighing on financial and consumer discretionary shares, respectively.
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