Sunday, January 11, 2015

Top of the Mind at the Start of the Week

*  The recent post illustrated the deflation theme impacting global stock markets.  My concern is that the overseas weakness may be more subtly impacting U.S. stocks.  The top chart tracks stocks across all exchanges and the number making fresh three month new highs vs. lows.  Note that the balance of new highs vs. lows has been waning since the very end of October.  The bottom chart tracks all NYSE shares closing above their upper Bollinger Bands vs. those closing below their lower bands.  This measure also has been showing waning upside strength.  This invites the hypothesis that the recent market action represents a topping process and that we could see a meaningful leg lower as the result of any oil/commodity-led capitulation.

*  Interesting post on why the Fed may be concerned about overseas economic weakness.  See also why deflation may be relevant to China and why "lowflation" is a challenge for Europe.

*  Some excellent links from the past week via Abnormal Returns, including the asset that best diversifies a stock portfolio.

*  Thanks to Steve at SMB for pointing out this well researched book and resource on momentum investing.

Have a great start to the week!