The Will Robinson Moment Continued

6. S&P 500, DJIA, DJT, and NASDAQ Momentum Oscillators: Each of these oscillators have been tested against historical data resulting in 24-week measurement periods for each that are based on the best fit of indicator reading to subsequent performance of the index. They are all at or are approaching peak levels that have historically marked the end of a short-term trend move. The oscillator range is 0 to 100. Reaching peak levels of 80 or higher have consistently indicated the end of an up-move. The S&P 500 reading is 91. The DJIA reading is 80. The NASDAQ reading is 89. The DJT reading is 87. I am not a buyer of equities at these levels and my recent actions this week (Monday December 12, 2016) reflected selling of shares in companies I hope to buy back at lower levels in the future. Following the adage of buying low and selling high governs this action.

7. Five-day summation of the DJIA point change compared to the NYSE net change in volume and issues for the week indicate a weakening state. For the prior five days, the DJIA has risen by over 600 points. The corresponding period net advancing volume over declining volume is 565 billion shares. The corresponding period net advancing issues over declining issues is 599 issues. Contrast this present state with the historic averages dating back to October 2009, and we find that there is a lack of underlying support for the index point advance. Historically, the average 5-day advance in points is 198 points, corresponding to average net advancing volume of 807 billion shares and net advancing issues of 2,372 companies. The lack of underlying participation in this index rally is very troubling in the non-confirmation of staying power.

8. Net Annual Advancing Volume as a percentage of total NYSE volume of shares traded is meaningfully above the historic average. Dating back to 2009, and utilizing a year period commencing on October 1 to focus on the seasonality of the fourth calendar quarter as reflective of the most up-to-date earning predictions for the current year and following year, this assessment looks at the relationship of the total net volume of advancing/declining shares traded to the overall volume for the year. On average, the annual net advancing volume over declining volume has measured 2.7% of total annual volume. The range for each year is as follows: 2009/10 = .4% (with a corresponding DJIA rise of 1,238 points); 2010/11 = .5% (with a corresponding DJIA rise of 135 points); 2011/12 = 4.4% (with a corresponding DJIA rise of 2,799 points); 2012/13 = 2.8% (with a corresponding DJIA rise of 1,769 points); 2013/14 = 3.3% (with a corresponding DJIA rise of 1,760 points); 2014/15 = -2.1% (with a corresponding DJIA point decline of 733 points); 2015/16 = 3.2% (with a corresponding DJIA point rise of 1,974 points). For the Y-T-D period from October 1, 2016 thru December 13, 2016 mkt open the percentage is 4.7%. (with a corresponding 1,563 point rise in the DJIA index). Clearly, the relationship that currently exists reflects a robust full year set of positive results, yet we are only a little over two months into the year. A correction will likely come soon to bring into balance the current year with the historic balances, as we presently reflect a full years relationship that is not viewed as being capable of moving much higher given the underlying fundamental market valuations that presently exist.

More to come……………………….

Author: Thomas Connolly

Tom possesses a rich and diverse background that includes deep investing experience, senior corporate executive positions, and roles as a Regional Managing Partner and Global Industry Leader within Ernst & Young. He has advised executives on some of the largest acquisitions and dispositions in the Media and Entertainment industry, including clients such as Comcast, Citibank, Sony, Dalian Wanda and Publicis. Tom is a Certified Public Accountant with a Masters Degree from Columbia University. His skills are further accompanied by a personal passion for the study of economic trends and evolving market dynamics.

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