The Stock Market's Balancing Act

 |  Includes: BN, DIA, FDX, QQQ, SPY, UPS
by: Roger I. McNamara

Search the history logs as one might it is hard to find U.S. stock market averages and indexes in such a fine state of balance as prevailed at the close of trading Friday September 10. Everything --- Dow Jones, S&P 500, Nasdaq and even QQQQ --- rested within 150 basis points of their respective moving 200-day averages. The latter themselves gave every indication over the waning days of August of a rollover into falling territory, but were rescued at cliff's edge and have since turned mildly upward in slope. Margins by which the groups lie below 52-week highs and above 52-week lows are not exactly equal, but they are remarkably close, in percentage terms as follows:

DJIA off 6.6, up 10.3
SPX off 8.9, up 8.3
NDQ off 11.4, up 9.7

A notable exception to these and similar arithmetic patterns is the Dow Transportation Average. Now ahead 7.4% year-to-date, it was marked at Friday's close 8.4% below its 52 week best, but an eye catching 22.3% over its 52-week closing low. Some accord this Average a measure relative disrespect owing to its comparatively small size and lighter trading volumes. Doubtless valid points, but the DJT does contain such moving around stalwarts as UPS, FedEx and Burlington Northern. Economists will say what they wish and the economy itself will yet behave in ways unfathomable to most of us, but it does seem to me that nothing much in the way of useful growth is in the cards absent things being moved around on the Nation's highways, rails and air spaces. Those endowed with finer statistical regression capabilities than I may wish to churn the numbers and tables into a discovery of whether absolute and relative strength in the Transport Average yields predictive advantage on future GDP outcomes.

Did I mention trading volumes? The topic is better be described as trading implosions. As recently as three months ago the 200-day averaged NYSE turnover was running roughly 1.25 billion shares a day. At last week's end that same number had dipped to under 1.20 billion, and its own 90 day rate of change now approaches Zero. Ace Barron's reporter Michael Santoli has described this as the market of Apathy. Common stocks have over the last 10-12 years delivered so little in comparison with antecedent promises and expectations that large numbers of the investing public have become uninvolved and uninterested. All the more reason to expect a spirited rally in coming weeks, especially as it is so widely known that September has, statistically speaking, been the market's cruelest month over the last half century.

Those among you holding long positions in U.S. common stocks are poised to enjoy a pending lift in your portfolio values.

Disclosure: None