March 25, 2009 (FinancialWire) (By Dr. Joe Duarte) -- The S&P 500 (SPX) pulled back on Tuesday, after a huge up day on Monday that left some questions still unanswered about this stock market. Yet, if prices continue to slough off, we may have seen the best levels for some time. Think of the current market like a big cat that just had a big meal. It's the length and the nature of the nap, and how the cat wakes up that will tell the tale. So here's the lowdown. The stock market rallied in a big way and delivered one of those statistical anomalies, a 40-plus to one up/down volume day, which according to the keeper of all things statistical, Mark Hulbert, has to be some kind of record. We've seen big days before, with at least one or two 20 to 1 up/down volume days coming to memory pretty readily. One was back in May of 1990, which led nowhere, and essentially was a one day summer rally. Hulbert, also noted the following: "No indicator is perfect, of course, and this one is no exception. There was a double 9-to-1 day this past Dec. 30, for example, and the market topped out just two days later. Another serious misstep for the indicator came at the top of the market in March 2000, just as the Internet bubble was bursting." So what is a 9 to 1 up/down day? It's when the volume of rising stocks on the NYSE in nine times the volume of falling stocks. It's called a momentum thrust, at least as originally described by Martin Zweig in his book "Winning on Wall Street." But like most indicators, it's not as flawless as time passes and more traders become aware of it. Yet, this one makes you wonder. Think about it, 41 times the volume in rising stocks to one. That means that just about everything that happened in the market on Monday was to the up side. That means that this is either the beginning of a huge rally, or that was the burnout. The real key development is when you get two 9 to 1 up volume/down volume days in succession, described by Zweig as essentially a doubly bullish signal. Hulbert, using data provided by David Aronson, an adjunct professor of finance at Baruch College, author of a book called "Evidence-Based Technical Analysis" (Wiley, 2007)," noted: "Professor Aronson, along with the students in a class he teaches at Baruch College, tested the statistical significance of "Double 9-to-1" signals. Aronson told me that his students did this by measuring the stock market's return in the 60-trading-day window following a Double 9-to-1, using historical data from 1942 through February of this year. They found that, in these trading windows, the S&P 500 index (before dividends) produced an average annualized return of 18.3%," compared to an annualized return of 4.3% otherwise. And although that sounds pretty good, this indicator has been less than stellar, as we have noted here times lately. As Hulbert notes, since the bear market started in October 2007, this indicator has had its problems. Note the following: "The Double 9-to-1 signal that was triggered this past Dec. 30. It was just two trading sessions later that the rally that began at the Nov. 20 low came to an end. And the market then fell off a cliff, declining by 20% over the next two months." "Another Double 9-to-1 signal was triggered on Feb. 6, furthermore, and yet another on Feb. 24. It wasn't until March 9, of course, that he bear market hit what, at least so far, is its low point." Hulbert talked to Aaronson in March and asked him how good the 9 to 1 up/down indicator really was, to which Aaronson answered "that the signal has had other failures before the current bear market, some spectacular. In fact, Aronson said, the stock market since 1942 has failed to rise in about one out of five of the 60-day periods following Double 9-to-1 signals." In other words, this thing has about an 80% chance of being right. Aaronson also told Hulbert that multiple 9 to 1 up/down days are more bullish, to which he answered that "There is no statistical support for such a notion in the data." Conclusion: We had a big day in the market. Anyone who followed our recent picks likely made money. Now comes the real work, the management of the gains. That, of course, has to do with our trading discipline, our attention to our sell stops, and how the market does.
The Investrend Earnings Calendar features Citi Trends (NASDAQ: CTRN), expected at $0.55; CKE Restaurants (NYSE: CKE), expected at $0.03; Paychex (NASDAQ: PAYX), expected at $0.36; WuXi Pharma Tech (NYSE: WX), expected at $0.06.
The Investrend Economics Calendar lists Durable Goods Orders for February (8:30 a.m.), New Home Sales for February (10 a.m.), EIA Petroleum Status Report (10:30 a.m.), Treasury auctions 5-year notes (1 p.m.).
The Investrend Events Calendar showcases ADP Analyst Meeting; BIIB Webcast of Research & Development Day; BOBE, CTS, IT, CRY at Sidoti & Company Emerging Growth Institutional Investor Forum; CIEN Annual Shareholders Meeting; EW at Lazard Capital Markets Medical Device Technology Conference; GLW Investor Luncheon; MKC Shareholders Meeting; PXD, EXH, GOK, DRC at Howard Weil Energy Conference; SD at Barclays Capital Fixed Income Energy and Pipeline Conference; VRMN, STP at Think Equity ThinkGreen Conference.
The Investrend Money Index is an indicator of the depth of market direction or indirection. While not always including the same stocks, the NYSE/NASDAQ 50 Most Actives indicate the direction in which the mass of money is flowing. Last session's trading showed nine advancers versus 41 decliners. Advancers were led by American Capital, Ltd. (NASDAQ: ACAS) up 19.02%, Las Vegas Sands Corp (NYSE: LVS) up 15.09%, Dryships Inc. (NASDAQ: DRYS) up 12.65%, Financial Bear 3x (NYSE: FAZ) up 10.16%, Seagate Technology (NYSE: STX) up 10.08%, Ultrashort Financial (NYSE: SKF) up 9.41%. Decliners followed Huntington Bancshares Incorpora (NASDAQ: HBAN) down 16.75%, Ultra Real Estate Pr (NYSE: URE) down 13.79%, Financial Bull 3x (NYSE: FAS) down 13.27%, Wells Fargo & Co New (NYSE: WFC) down 10.56%, Fifth Third Bancorp (NASDAQ: FITB) down 10.50%, Jp Morgan Chase Co (NYSE: JPM) down 8.52%, Bk Of America Cp (NYSE: BAC) down 7.44%, Ultra Financials Pro (NYSE: UYG) down 7.19%, Us Bancorp (NYSE: USB) down 6.25%, Amer Intl Group Inc (NYSE: AIG) down 6.08%.
Quote of the Day: "Everywhere I go I'm asked if the universities stifle writers. My opinion is that they don't stifle enough of them. There's many a best seller that could have been prevented by a good teacher." Flannery O'Connor
Today is: Maryland Day, Pecan Day.
Happy Birthday: Arturo Toscanini, Bela Bartуk, Arturo Toscanni, Ed Begley, Howard Cosell, Simone Signoret, Flannery O'Connor, Jim Lovell, Gene Shalit, Hoyt Axton, Anita Bryant, Aretha Franklin, Elton John, Bonnie Bedelia, Sarah Jessica Parker, Tom Glavine.
Today in History: Richard I was wounded in 1199 by a crossbow bolt while fighting France, leading to his death on April 6. Robert the Bruce became King of Scotland in 1306. Sir Walter Raleigh was granted a patent in 1584 to exploit Virginia. Saturn's largest moon, Titan, was discovered in 1655 by Christian Huygens. The first fully functional space shuttle orbiter, Columbia, was delivered in 1979 to the John F. Kennedy Space Center to be prepared for its first launch. Cosmonaut Sergei Krikalev returned to Earth in 1992 after a 10-month stay aboard the Mir space station.
[FirstAlert" was created by Gayle Essary, founder of Investrend Communications, Inc., parent of Investrend Information (http://www.investrendinformation.com). The opinions expressed in FirstAlert" do not necessarily reflect the opinions of Investrend.]
Copyright(C)2009 by financialwire.net, Inc. All rights reserved.
Legal Disclaimer:
EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability
for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this
article. If you have any complaints or copyright issues related to this article, kindly contact the author above.
