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Stock Market Analysis: 11/03/10

My Risk Appetite Index, which consists of an equally-weighted long position in the NASDAQ 100 and Russell 2000 (high beta risk-on index) minus an equally weighted short position in the defensive sectors of Consumer Staples, Telecom and Utilities (low beta risk-off index), continues to decline. Underlying the weakness of the risk appetite index is a change in sector leadership from the high-beta sectors like Tech, Consumer Discretionary and Financials to defensive sectors like Utilities and Consumer Staples (see Interpreting a possible volatility regime shift). The technical warning signs of equity weakness are clear to see. The US economy is behaving relatively well and seeing signs of a snap-back of winter related weakness. Best Buy is offering the PS5 with Blu-ray for $500 as well as the $400 Digital Edition (which you can find by clicking the button below). I can recall analyzing the Netscape IPO (yes, remember them?) and deciding that the valuations were sky-high and I was going to avoid internet trendy boutique s.


Large purchases of calls were putting pressure on those taking the other side of the trade to hedge their exposure to rising prices by buying stock, analysts said – a “vicious circle” that was driving valuations higher. The good news is that the bottom in the Fall has historically been a durable bottom and a superb buying opportunity for stocks, as per this analysis from J.C. Doomesterism is an ideology and not an investment approach and I try to be apolitical in my investment analysis (see Are you a good capitalist?). In early April, I wrote about risk appetite rolling over (see Bears 2 Bulls 1 and A case of risk exhaustion?). On that day, the Dow Jones plunged below 8000, hit a low of 773.71, then had the jaw dropping move back up to 8989 and closed at 8451. See what I mean? Cisco Systems, Inc. (CSCO) – Shares of Cisco Systems, Inc. (CSCO) held It’s 52 week low on Tuesday. The next major resistance level for Cisco Systems is located at $23.90.


Cisco Systems is a solid long term buy below $21.50. This second chart shows a longer term perspective. The top panel is the SP 1500 A-D Line, the second the % of stocks in the SPX above their 50 day moving averages, the third % of stocks in the SPX with point and figure buy signals and the four panel the SPX. The condition of the % of stocks above their 50 dma is less than 60% (currently 54%) and % of stocks with point and figure buy signals is less than 70% (currently 68%) has been present in past corrective periods. Not so much. Japanese bond bears are having an awful time, with the yield on the 7-year JGB, closely watched by traders, dropping to just 0.28 per cent so far this year, only 6bp above its all-time low. 2.40 was the low on Friday and is also a major support level. stocks with relative linearity have active buyers support and have higher likelihood of continuing their smooth moves. For the past several weeks, I have been voicing technical concerns about the stock market. These two indicators flashed a warning sign when the market weakened in February, but that was a false signal as a major correction did not follow.