Tags: advance | decline | NYSE | breadth

Late Summer Market Performance

By    |   Wednesday, 14 Aug 2013 08:00 AM

Goodness, should we refer to Aug. 13 as late summer? Well, the dog days — corresponding to the appearance of Canis Major, the Dog Star, just before sunrise — are technically over. And maybe if, like me, you had been on vacation cycling since April 15, the summer would feel long in the tooth.

On Wall Street, August sees sweaty traders looking for an excuse to take some days off. This thins volume and makes watching traditional market indicators less reliable. Last week's New York Stock Exchange volume was the lowest since last autumn. Measures of breadth — new highs/lows, advances/declines — seem to show a bit of fatigue in recent sessions.

Be careful when looking at such figures. Make sure that your advance/decline database includes only common stocks. These days many real estate investment trusts, oil partnerships and similar financial instruments trade on the NYSE. The vast majority of these are low-growth/high-dividend payers that trade as proxies for bonds and are extremely sensitive to interest rates. Since the latter have been rising lately, they distort the breadth figures: as interest rates rise, bond (and bond proxies) fall. They also are trading near their year's lows.

To prevent this bias and double counting, concentrate on breadth statistics that look at the same, consistent basket of common stocks. One such example is the advance/decline line for the Standard & Poor's 500 available at Masterdata.com. Their advance/decline line "confirmed" last week's highs, while some "broader" advance/decline measures did not. Their weekly advance/decline figures, less volatile and tuning out the short-term day trader factors, were even stronger.

Another way to look at the broad market is to go over to Stockcharts.com and check out their charts of their S&P 500 sector exchange-traded funds (ETFs). My readers know how pleased I am at the strong performance of the Health Care Select Sector SPDR (XLV) ETF. With the postponement of key parts of Obamacare until 2015, healthcare stocks are enjoying the death throes of this legislative and regulatory nightmare. You will want to be invested in this sector when the Republican-led U.S. House sticks a dagger in its heart in the next year or so.

In contrast, only the Financial Sector Select SPDR (XLF) ETF has shown any fundamental and technical weakness, undercutting its late July lows. Only if the weakness spreads to other sectors should investors begin to show concern.

Next week: Since I have been fortunate enough to be on the right side of this market most of the time since I started writing for Newsmax, I thought I would share my thoughts — real early, I hope — about what levels in the Dow Jones Industrial Average and S&P 500 might be the ultimate top in this first phase of the secular bull market I believe is in progress.

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Gary-Jakacky
Make sure that your advance/decline database includes only common stocks. These days many real estate investment trusts, oil partnerships and similar financial instruments trade on the NYSE.
advance,decline,NYSE,breadth
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2013-00-14
Wednesday, 14 Aug 2013 08:00 AM
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