Tags: Newton | stocks | highs | Mirhaydari

Greywolf's Newton: Fewer Stocks Are Headed to New Highs, an Ominous Sign

By    |   Tuesday, 27 May 2014 10:22 AM

The fact the market is making new highs on the backs of fewer and fewer stocks is a huge sign of distress that investors should beware of, according to Mark Newton, chief technical analyst at Greywolf Execution Partners.

That kind of top-heavy upward trajectory often leads to trouble, he told CNBC and Yahoo's Talking Numbers. In fact, the one-month daily average of stocks hitting 52-week highs is approximately 26, down sharply from about 101 at the same time in 2013.

"If you look at the breadth, we've seen a pretty amazing amount of deterioration just since last May," Newton noted. "It's dramatically down from what we've seen over the last year. And, that is a concern."

Editor's Note:
Secret Wall Street Calendar Uses Strange ‘Crash Alert System,’ Gets 18.79% Annual Returns

Newton said he is looking for a summer pullback in the market because stocks are "the most overbought we've been since 2007."

"We could have a pullback between the months of July and September/October. That historically is a seasonal time of weakness."

Steve Cortes, founder of Veracruz TJM, also urged caution on grounds that fundamentals are weak.

"Total stock market capitalization — the value of all stocks put together — as a percentage of total U.S. GDP are right back near the highs last seen in the year 2000," Cortes told Talking Numbers. "Stocks as a percentage of the economy are incredibly expensive."

Anthony Mirhaydari, founder of Mirhaydari Capital Management, predicted in a column for Investor Place that the current stock market rally will not last.

He said housing looks good, but other fundamentals in the economy look weak.

According to Mirhaydari, "First-quarter GDP is set to be revised into negative territory, retail sales are disappointing, inflation is drifting higher, and consumers are sucking down their savings and turning once more to short-term credit to pad their budgets."

He explained that stock buybacks at cheap interest rates have been the primary method that the Federal Reserve's "ongoing cheap money stimulus has inflated what increasingly looks like another stock market bubble."

Mirhaydari noted only 60 percent of the stocks in the S&P 500 are above their 50-day moving average — down from 70 percent a couple of weeks ago and 85 percent at the beginning of April — a worrying sign of the narrowing of buying interest.

Editor's Note: Secret Wall Street Calendar Uses Strange ‘Crash Alert System,’ Gets 18.79% Annual Returns

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The fact the market is making new highs on the backs of fewer and fewer stocks is a huge sign of distress that investors should beware of, according to Mark Newton, chief technical analyst at Greywolf Execution Partners.
Newton, stocks, highs, Mirhaydari
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2014-22-27
Tuesday, 27 May 2014 10:22 AM
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