Market Breadth Ratios are weak

Growth momentum leaders are still the weakest category. Market Breadth Ratios are showing that. Market Breadth Ratios are a very good indicator to gauge the performance of growth momentum stocks. We should wait for these numbers to improve before we invest in them.

Read the blog of August 11, 2012 also, to see what is working in the market currently.

What is the Market telling us currently?

All three market indicators SPY, QQQ and IWM are showing upward trends. See the chart below to understand what category of stocks these ticker symbols represent. The highest "speed of uptrend" is on SPY. This means that the stock prices of companies in SPY (ETF for S&P500) are in a clear uptrend. The highest "thrust in uptrend" is on QQQ. This means that stock prices of companies in QQQ (ETF for Nasdaq 100) have started their uptrend and should carry on, since the thrust is high.

The numbers for IWM (ETF for small cap) are not as strong as for QQQ and SPY. This means the stock prices for companies in IWM are showing a weak uptrend.

Thus the area to be in is big cap stocks. Big Cap dividend paying stocks were working very well till now. Now Big cap growth stocks are also starting to work. Some Money will move from Big Cap dividend paying value stocks to Big Cap Growth stocks, this will create a slight slowdown in the performance of dividend paying stocks. We can see that in the numbers in the chart below. Numbers for DIA are not as good as numbers for SPY and QQQ.

Growth momentum leaders are the weakest category. We should wait for their numbers to improve before we invest in them.

Market Breadth value are still weak

Market Breadth values are still showing weakness. Growth stock performance has started to improve but is still not ready for investing in that category.

Investing in dividend paying value stocks is working.

Market Breadth Ratios are still weak

The Market Breadth Ratios are still weak. Investing in growth stocks is not working in this environment.

Investing in dividend paying value stocks is working but currently there is a downward pressure on prices, when looking at both the weekly and daily time frames. This means that on a weekly time frame it may be another 4 to 5 weeks before the downward pressure on prices dissipates. In the meantime do not add any more money to your portfolio. Read the blog of July 31, 2012 for a detailed analysis of what is being said on today’s blog.

There is an important rule to remember in investing, that if the market does not behave the way you expect it to behave, and your method of analyzing the market is sound. It does not mean that your methodology is wrong; it means that something “bigger” is at work. This should prompt you to step back and reassess the underlying trends.

Not a good time to add more money to the market

The weekly oscillator is at the top. This indicates the probability of it coming down is high. With that it will bring the prices down as well.

The daily oscillator is at the top and turning down. This indicates the probability of it coming down is high. With that it will bring the prices down as well.

Since both daily and weekly price charts are giving a high probability of coming down in prices, it is not a good time to add more money to the market. It will be prudent to wait and see what happens.

If the market does not come down in the next few weeks but goes higher and the oscillators remain at the top, then it will indicate a strong uptrend has begun.

Just to reiterate. Investing in Growth Stocks is still not working.  What is working is investing in dividend paying value stocks.