Sunday, August 12, 2007

A Few Observations to Start the Week

* Fewer New Lows - With each downthrust in the market, fewer stocks have been making new lows, as the chart from my latest Weblog entry indicates. For the week, the Adjusted Cumulative TICK was solidly positive. I also notice that Friday's momentum numbers (Demand/Supply) were stronger than Thursday's. I will be watching for signs of buying interest on Monday to see if diminished selling pressure can bring out the bulls.

* Where Value Lies - Since 7/27, nearly 70% of all ES volume and nearly 70% of all one-minute closing prices occurred between 1487 and 1453.50. That's the broad value area for this market. Given the market weakness at week's end, a good Market Profile trader will now look to see this week how we trade relative to this range, especially if we accept or reject value below the lower band.

* Where Strength Lies - It's been a weak month for stocks, but 9 of the 40 S&P stocks I follow in my basket (evenly divided among eight sectors) are actually up over the past 20 trading sessions. These include UPS, PG, KO, WAG, SLB, MRK, LLY, IBM, and CSCO. Recession resistant issues--Consumer Staples stocks--have been particularly strong. Defense stocks ($DFX) have also held up relatively well.

* Strength in the Mortgage Patch - FNM and FRE--Fanny and Freddy--don't seem to mind the mortgage weakness; their securities are backed by fixed-rate mortgages, not the riskier adjustables that are experiencing foreclosures. They were unusually strong, though volatile, this past week.

2 comments:

Grow Your Funds said...

Interestingly, several of those stocks that have been very strong of late relatively speaking such as PG, KO, and WAG are all pretty weak today. It almost appears as the stocks that have been getting hit get a little bid, these are taking a breather. I think these stocks will be higher again in the near future though.

Aaron
http://www.growyourfunds.com

Brett Steenbarger, Ph.D. said...

Thanks for the note and link, Aaron. In a sense, the recession resistant stock outperformance is another sign of risk aversion and not necessarily bullish for the mkt overall.

Brett