Wednesday, January 09, 2008

A Few Market Observations for Wednesday

* Weakness Update
- My last post updating indicators showed that a broadening range of stocks were weakening and so far that's proven to be the case. Interestingly, we had 771 new 20 day highs on Tuesday against 2234 new lows across the NYSE, NASDAQ, and ASE. Nearly half of those 20-day lows, however, were also 52-week new lows. There is a core group of stocks that are quite weak; small caps are notable in that regard; financials and homebuilders continue to lead the downside (and were an excellent tell for the late weakness on Tuesday). Among NYSE common issues, we had 40 new annual highs against 390 new lows. The failure of the weakness to attract any sustained buying has been worrisome: bottoms are usually formed when we get very strong buying on high volume at price lows, as institutions pick up bargains. No bargain hunting yet.

* Largest Caps Outperform - Among Dow 30 Industrials on Tuesday, 2 made new 52-week highs and only 5 made lows. Among S&P 600 small caps, we had 4 new highs against 133 new lows. Among the S&P 400 mid caps, we had 2 new highs against 93 lows. And if we look at the S&P 500 stocks, we had 23 new annual highs against 140 new lows. It's really only the largest of the large caps that have any remnant of strength; otherwise, we're seeing over 20% of stocks making 52-week lows.

* Bear Market Low? - The excellent Decision Point site is showing 28% of NYSE issues trading above their 200-day moving averages. A look back at bear market lows over the past 20 years, however, suggests that we haven't started to form bottoms until fewer than 20% of stocks hit that criterion. Meanwhile, amidst inflation concerns and a weak dollar, we can see (above) that commodities continue to rock.