Wiser Trader Stocks and Options Newsletter
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Issue No. 104 December 4, 2006 Prescott, Arizona Systems@WiserTrader.com
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1.0 Trading
The major indices lost an average of 0.83% this week.
|
Index |
Last Week |
This Week |
% Change |
|
DOW |
12280.20 |
12194.13 |
-0.7% |
|
NASDAQ |
2460.26 |
2413.21 |
-1.9% |
|
S&P 500 |
1400.95 |
1396.71 |
-0.3% |
|
Russell 2K |
792.28 |
781.17 |
-1.4% |
|
NYSE |
8933.43 |
8949.07 |
0.2% |
|
Average |
|
|
-0.83% |
1.1 Profit Taking
The S&P 500 in Figure 1A was flat to slightly down this week. Softening manufacturing activity was reflected in an ISM number that fell below 50. Traders, indeed, took some money off the table as prospects for a fourth quarter rally began to dim. Expectations for a fed move to reduce interest rates in the first quarter of 2007 increased. Yet financial stocks were unable to take leadership. Market breadth again began the week low, peaked at mid-week and dropped off on Friday. The average Williams-%R for the above five indices is -49. The 200-day moving average is -39, two points lower than last week.
FIGURE 1A
The NASDAQ in Figure 1B lost 1.9% for the week, hugging its upper trend line. Precious metals, utilities and energy moved to the forefront while financials, transportation and technology lagged.
FIGURE 1B
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2.0 Market Analysis
Key industry ETF’s in Table 2A are Biotech and Semiconductors, which confirm the NASDAQ. Transportation confirms the Dow Jones Industrial Average according to Dow Theory. Banking and Financials are confirming indicators for the S&P 500. Gold and Housing are respective indicators for the inverse health of the currency (inflation) and the capacity for consumer spending.
Table 2A
Indices, Key Industry ETF’s and Sector SPDR’s
|
|
1 month |
1 wk ago |
2 wks ago |
3 wks ago |
4 wks ago |
|
Dow Jones Industrial Index |
1.7% |
-0.7% |
-0.5% |
1.9% |
1.0% |
|
NASDAQ Composite Index |
3.5% |
-1.9% |
0.6% |
2.3% |
2.5% |
|
S & P 500 Index |
2.4% |
-0.3% |
0.0% |
1.5% |
1.2% |
|
NYSE Composite Index |
2.7% |
0.2% |
0.4% |
0.8% |
1.3% |
|
Russell 2000 Index |
3.8% |
-1.4% |
0.5% |
2.5% |
2.2% |
|
HGX, Phil. Housing Index |
9.9% |
3.0% |
0.7% |
5.2% |
0.7% |
|
IYR, Real Estate |
8.4% |
-0.1% |
5.7% |
1.8% |
0.8% |
|
GLD, GOLD |
2.9% |
1.0% |
2.8% |
-1.1% |
0.3% |
|
RKH, Banking |
-0.3% |
-1.2% |
-0.8% |
0.2% |
1.5% |
|
IYT, Transportation |
2.2% |
-2.7% |
-0.1% |
2.4% |
2.7% |
|
SMH, Semiconductors |
3.2% |
-3.7% |
0.2% |
5.0% |
1.9% |
|
BBH, Biotechnology |
-0.8% |
-0.3% |
-1.4% |
1.1% |
-0.2% |
|
OIH, Oil Infrastructure |
8.7% |
5.2% |
2.5% |
-0.5% |
1.2% |
|
XLE, Energy |
7.3% |
5.5% |
0.8% |
-0.6% |
1.5% |
|
XLU, Utilities |
3.2% |
1.4% |
0.4% |
0.4% |
0.9% |
|
XLB, Materials |
4.3% |
-1.0% |
3.7% |
0.4% |
1.3% |
|
XLI, Industrial |
2.9% |
-1.6% |
0.2% |
2.6% |
1.7% |
|
XLK, Technology |
3.0% |
-1.9% |
0.5% |
2.4% |
2.0% |
|
XLV, Healthcare |
0.5% |
0.6% |
-0.6% |
2.2% |
-1.8% |
|
XLF, Financials |
1.2% |
-1.6% |
0.1% |
0.6% |
2.0% |
|
XLP, Consumer Staples |
0.2% |
-0.8% |
-0.6% |
1.3% |
0.3% |
|
XLY, Consumer Discretionary |
2.8% |
-0.8% |
-0.4% |
2.1% |
2.0% |
The volatility indexes and put/call ratio are listed in Table 2B.
Table 2B
Sentiment
|
Indicator |
Current |
Last Week |
2 Weeks Ago |
Complacent |
Cautious |
|
VIX ** |
11.7 |
10.7 |
10.1 |
< 20 |
> 50 |
|
VXN *** |
16.6 |
15.6 |
15.3 |
< 30 |
> 70 |
|
CBOE Equity Put/Call Ratio (Contrarian View) |
0.60 |
0.53 |
0.47 |
< 0.55 (Mkt. Top) |
> 0.70 (Mkt. Bottom) |
|
** Above 20 day SMA = Short-term sell signal. *** Above 20 day SMA = Short-term sell signal. |
|||||
Figure 2A compares the major averages with key ETF’s and Sector SPDR’s.
FIGURE 2A
Table 2C
Market Summary
Industry performance is based on the Yahoo Industry Classification System
Major Indices For the Past Week: Dow Jones -0.7% NASDAQ -1.9% S&P500 Index -0.3% Russell 2000 -1.4% NYSE +0.2% 30 Year Bond 4.541% 10 Year Note 4.425% FOMC Rate 5.250% Leading Industries For the Past Week: Lagging Industries For the Past Week: |
Leading Industries For the Past Month: Lagging Industries For the Past Month: Crude Oil $63.55 Gold for the past 30 days: USD +3.23% CAD +4.22% CHF -0.96% GBP -0.42% EUR -0.95% JPY +1.60% |
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3.0 Procedure
The following watch lists contain stock candidates for consideration. They are not necessarily trades. Categories include checklists for insider buying and cash rich companies, as well as, filters that employ stock picking methods used by master traders. The information is not meant to imply any endorsement or sponsorship by these master traders.
Current stock rankings are based on the degree to which stocks are overbought or over sold based on the 28-period Williams %R for the past two trading days. Two columns are labeled “%R1” and “%R2” with “%R2” indicating the Williams %R for the most recent trading day. Of course, values more negative than -80 are oversold and those less negative than -20 are overbought.
One should keep in mind that oversold stocks are not necessarily ready to move upward. They could very well be in a condition of continuous decline. The lists are meant to serve as a starting point for further due diligence.
A column labeled “Monthly % Gain” was added to show the inverse relationship between price action over the past month and the Williams %R. The change from a 10-period Williams %R with a weekly percent change to a 28-period Williams %R with a monthly percent change was done to reflect a longer term view.
Watchlist performance is based on weekly closing prices on Friday. The “Reference” is the date that a stock passed the indicated filter and was first added to or returned to the list. The “% Change” is how the price has changed since the reference date. Stocks that are down 10% or more after being listed are removed for a period of about two months. The “% from Max” is the percentage the price has declined from the maximum price reached since the reference date. Stocks that are down 8% from their highs after being listed are flagged in yellow. Stocks that are down 15% from their highs after being listed are removed for two months. More information on filters is available on the web site.
A performance summary of filtering techniques for checklists and master trader selection methods is given in Table 3A.
Table 3A
Stock Filter Summary
|
Filter |
Avg. % Change Since Listed |
Avg. % Change Friday |
1 Month |
1 Week Ago |
2 weeks Ago |
3 Weeks Ago |
4 Weeks Ago |
|
Net Insider Buying |
10.6% |
2.4% |
6.6% |
1.6% |
0.5% |
1.0% |
3.4% |
|
Cash Rich Companies |
3.6% |
-1.2% |
4.2% |
-2.4% |
-1.3% |
5.0% |
3.0% |
|
Price to Free Cash Flow |
9.0% |
-0.7% |
1.8% |
-1.8% |
-1.6% |
4.8% |
0.6% |
|
Growth Momentum |
9.7% |
0.5% |
5.4% |
-0.6% |
1.2% |
3.2% |
1.5% |
|
Lynch |
29.0% |
0.1% |
3.5% |
1.6% |
1.9% |
0.6% |
-0.9% |
|
Buffett |
14.3% |
0.1% |
6.1% |
1.4% |
1.6% |
0.4% |
2.6% |
|
Graham |
21.9% |
-0.1% |
4.7% |
0.6% |
0.5% |
1.3% |
2.1% |
|
Templeton |
13.7% |
-0.1% |
4.9% |
0.5% |
-0.3% |
3.0% |
1.7% |
|
Zweig |
10.8% |
0.1% |
4.2% |
0.1% |
0.5% |
1.8% |
1.9% |
|
Average |
13.6% |
0.1% |
4.6% |
0.1% |
0.3% |
2.4% |
1.8% |