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.


Scott said...

Hi Brett---I think that some of the decline in your numbers at your blog sight indicates investors giving up and becoming disinterested in the market. Individual investor calls to retail brokers have also fallen way off lately, as those who were panicky have sold and those that are left are just holding on for dear life. Also hearing lots of investors not opening their statements of account.

Scott S.

Mark said...

Who is selling than?


CharlesTrader said...

One small bit of good news is that since October 10, volume on the S&P 500 Index has been decreasing on each new low.


Craig said...

> who is selling then?

mutual funds...

C Hayes said...

What is the relationship between low yields and bonds being a good investment. I have a bond fund in my 401K and it has done very well the last couple of months but I don't really understand why. I just read that having a bond fund in your portfolio is a good idea so I chose one last year.