Monday, April 14, 2008

Perspectives to Start the Market Week

* Yet Another Longer-Term Perspective - I recently offered a long-term perspective based on the percentage of NYSE stocks trading above their 200-day moving averages. Here's a different take on the issue. In January and March of this year, as markets hit their lows, the S&P 500 Index ($SPX) moved more than 10% below its 200-day simple moving average. I went back all the way to 1960 (N = 11962 trading days) and found 667 occasions in which $SPX was more than 10% below its 200-day MA. When we look 200 days later, $SPX was up 525 times, down 142 times, for an average gain of 13.51%. That compares very favorably with the average 200-day gain of 6.05% (8017 up, 3268 down) for the remainder of the sample. Of course, that's not to say that a weak market can't get weaker: in 1974, 1987, and 2002, $SPX went more than 20% below its 200-day MA before righting itself. Interestingly, there have only been 78 days in the entire period from 1960-present in which $SPX has been more than 20% below its 200-day moving average. The market finished stronger 200-days later on 76 of those 78 occasions.

* Interesting Fed Perspectives - The Big Picture takes a look at Greenspan, Bernanke, and Friedman and the use of the printing press to work our way out of deflation. For more on Fed perspective, check out the updated links at Trader Mike's site and several excellent links at Abnormal Returns.

* Profile of a Stock Picker - Charles Kirk interviews a winning stock picker and takes a look at what makes him tick. While we're on the topic of stock picking, check out the fruits of Chris Perruna's recent research.

* Declines in a Consolidating Market - Quantifiable Edges examines what tends to happen when markets drop during a non-trending period.