Admittedly, divergences are horrible timing tools, but they become a bit more alarming when they develop while stocks are in an overbought state. As equities consolidate near all-time highs, we continue to see deteriorating internals beneath the surface. First, New 52-Week Lows are starting to outnumber New Highs. Secondly, and more importantly in our view, the Wolfe Technical Scoring Model has continued to deteriorate over the past few weeks. Back in the first week of July 73% of S&P 500 constituents were bullishly ranked in our work (as a reminder, we want to buy 3s and 4s and sell/avoid 0s and 1s). Today, that number stands at 59.6%. On the flip side, 0s and 1s have more than doubled over this time frame from 12.3% to 26%. We want to see internal strength and broadening on new highs, not corrosion. To us, this suggests a tired market that is due for some back filling – in other words, fade strength. The first support for the S&P is 2940, and then 2860.
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As we’re sure many of our readers are aware, we are huge fans of stocks coming out of bases, especially BIG BASES. Today’s note takes a look at a few of our favorites.
Maybe it’s the contrarian in us, but we’ve always been intrigued with stocks that have strong or improving technical attributes, while at the same time facing a great deal of investor skepticism. Today’s report takes a look at the names in the Russell 2000 where short interest as a percent of float is greater than 30% and the technical setup is improving to outright bullish. 64 names in the Russell 2000 passed the short interest screen, but only 12 were compelling from a technical perspective. Plenty were downright ugly – and one which w
In his book, The Science of Hitting (1968), Ted Williams – who some say is the greatest hitter of all-time – tells the reader what Rogers Hornsby (the only player in major league history to average. 400 over 5 seasons) told Williams about hitting in 1938, the year before Williams made it to the bigs. Hornsby said the single most important thing for a hitter was “to get a good ball to hit.” In other words – swing at strikes. It works as market advice, too, on both the long and short sides. For example, on the long-side we focus on items that score 3’s & 4’s in our Technical Scoring System and on the short-side it’s items that score 0’s & 1’s.
en in the aughts we used Citigroup (C) as the market’s bellwether – it was our line then that “Citigroup is the most important stock in the world” – and when it failed (and Financials in early 2007 had a 22% relative market cap weighting in the S&P) it made our negative call on the market (then) more definitive. And we thought about this premise in earnest recently when we heard the mid-80s song “The Belle of St. Mark” by Sheila E.
Trying to identify successful short candidates is always a difficult task, but one where your odds of success can be enhanced when your bearish thesis is confirmed by three distinct investment disciplines - Accounting/Strategy, Quant and Technical.
The Slammy Award was a creation of the WWE, as an homage to the Oscar, Grammy, and Emmy awards, and given to pro wrestlers, their managers and others within the WWE. We always liked that the award had the word “slam” in it which made it – as wrestling fans will confirm - a perfectly and authentic example of onomatopoeia. After all, if pro wrestling isn’t about “slams” what’s it about? Here are some charts in danger of being slammed.
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