Thursday, November 05, 2009

A Further Look at Market Laggards




We've seen a rally off the recent market lows, but several areas of the market are lagging. Above we can see that bank ($BKX; bottom chart) and insurance ($KIX; middle chart) remain well off their highs. The financial sector is one I'm watching closely; it led the market meltdown and then led the risk rally since March. Its underperformance now is unsettling to the bull case.

Also clearly underperforming is Japan (EWJ; top chart). This is another situation I'm watching closely, given troublesome longer-term fundamentals, including high levels of public debt and problematic demographics.
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4 comments:

Cocameister said...

Dr. Brett,

The Russell 2000 and semiconductors are also lagging. They were key leaders of the multi-month rally.

zircon-212 said...

The tone of the post suggests one is trying to defend an existing short position. Surely there are sectors out there supporting a bullish view that have not been mentioned. I read a post a few days ago by a smart chap discussing the pitfalls of defending a view and ignoring what the market price action is telling you. I have no directional bias...I'm just asking.....

omi said...

I'm neutral on the market with slight bearish bias, however the EWJ chart looks like a double bottom ready to bounce.

zircon-212 said...

Cheers for that Omi. Pre-coffee out here on PST so still a bit edgy. Anybody else find the inane, random comments by posters throwing in their 2 cents about whether they are bullish or bearing extremely irritating? Doc B puts views in context to make us think about how we are looking at markets and how those indicators affect our psychology and ultimately the trades we put on. That is very useful. What is not is some random poster (maybe it would be a bit more interesting if Julian Robertson piped in)doing little more than demonstrating the ability to flip a coin. Like I said it is pre-coffee. Anyway I digress...."Those views take the active trader away from the simple supply and demand that govern action on the day time frame". On the other hand a tab allowing us all to vote on a particular time frame and showing the net tally would be useful especially from a contrarian basis. PTJ called up all his counterparties pre-open and asked their view on a select list of markets. If he had an overwhelming consensus one direction his first trade of the day was to go opposite the consensus and see how the market reacted. If he got some bang for his buck he knew he found the soft side and exploited this fact. If his trade ran into a rock wall the info was priceless.