Wednesday, November 19, 2008

High Yield, Low Performance and Other Market Ideas

* Unyielding Yield Play - One rule that's held consistently in the recent market is that reaching for yield has cost investors in performance. I took a look at the FINRA data and the numbers were eye-opening. Here are the advance/decline numbers this past week for bonds in their investment grade index and bonds in their high-yield index (in parentheses):

Tuesday, Nov. 18th: 1611/1232 (347/639)
Monday, Nov. 17th: 1374/1422 (317/650)
Friday, Nov. 14th: 1540/1140 (401/555)
Thursday, Nov. 13th: 1379/1471 (360/631)
Wednesday, Nov. 12th: 1607/1390 (334/728)

As we can see, advancing bonds and decliners have been pretty even for the last five trading days among the investment grade issues. Decliners have been ahead of advancers by about 2:1 among the high-yield bonds, however.

Significantly, we had 266 out of 3211 investment grade bonds traded on Tuesday make fresh 52-week lows, less than 10% of the group. Among high-yield bonds, 285 of the 1118 bonds traded made new annual lows, more than 25% of the group. Bond pricing is an excellent sentiment gauge, when you consider that pricing is reflecting perceived odds of default.

* Twitter Update - You may have noticed that I'm adding more blog links to my Twitter posts; I'll also be tracking daily money flow figures for the Dow, with some observations about flow numbers specific to market sectors. Subscription to the Twitter postings is free, of course; you can sign up on my Twitter page or simply track the last five posts on the blog under "Twitter Trader".

* Blog Traffic - We hit new lows today; the market was really ugly throughout the session. Still, I'm not seeing the expansion of blog traffic the way I did during the October routs. Over the weekend, the numbers were more consistent with levels seen at market tops, as I noted in a Twitter post. It's not a perfect measure, but it's held up pretty well during this period of weakness.

* Free Webinar - Dave Mabe of StockTickr is speaking at the Las Vegas Traders Expo tomorrow, and his talk on automated trading will be webcast free of charge. Sweet.

* Lots of Good Reading - Fresh links from The Kirk Report, including a look at sector P/E ratios and more trouble ahead from derivatives.