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Bob Palmerton
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Mr. Palmerton is the founder of Baseline Analytics TrendFlex, a market trend-following system incorporating high-probability trend change signals. Robert is a Registered Investment Advisor. He is co-founder and advisor to The Absolute Return, LLC, which manages a family of absolute return... More
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  • Technical Warning Signs

    I'm normally not one for reading too much into one day's market action, but Tuesday presented a few noteworthy concerns on the technical health of the stock market.

    The recent short-term topping action in the S&P 500 was accompanied by higher volume (no doubt in part as summer vacations come to a close) and decidedly weaker market breadth.

    As the chart below shows, the S&P 500 has seen higher volume days on the downside.

    (click to enlarge)

    The 1975 level represents initial support. I believe that if RSI can hold to a low in the 30 area, we will see a modest pullback and nothing too serious. Watch that RSI closely; it has remained bullish (30-ish as a low) during setbacks in the S&P 500. Any pronounced dip below 30 will correspond with a more serious correction.

    Market breadth has takes a sour turn of late. The chart below shows the NYSE Advance/Decline ratio, New Highs vs. New Lows, and the Summation Index, which we use to gauge market momentum.

    (click to enlarge)

    Note that the high/low ratio is approaching 0, not far from where it settled at the trough of the prior market setback in early August. The summation index in particular looks rather limp. Note how it bounced from bearish territory in early August as the S&P 500 headed to new highs. But the summation index was unable to return to barely half its level at the prior peak as the S&P 500 topped.

    These indicators suggest waning momentum and a lack of any exciting catalysts to push the market decidedly higher. Caution and capital preservation are key; protect gains and seek hedges to long positions (and add to shorts selectively) as the short to intermediate-term character of the market takes a breather.

    Visit our Home Page for the latest free Flash Report: stocks that had a bit of a breakdown (and more to go?) on Tuesday.

    Tags: SPY, DIA, market trend
    Sep 09 10:28 PM | Link | Comment!
  • Interesting Cycle View Of Unemployment Claims And The Stock Market

    Baseline Analytics utilizes Federal Reserve data to assess economic trends and their correlation with stock market performance. An evident and rather interesting long-term cycle trend view of the relationship between Initial Claims for Unemployment vs. the Wilshire 5000 has emerged.

    The chart below plots Unemployment Claims and the Wilshire 5000 from 1985 to-date.

    (click to enlarge)

    Note the troughs in the years 2000, 2006 and today (the far right lower corner of the chart). Unemployment Claims in the 300,000 area such as that shows at these trough points have preceded major market tops. The concept here is that great news as seen in shrinking unemployment claims has correlated strongly with gains in the stock market, but both eventually reach their respective peaks and troughs, then reverse.

    This is certainly not a timing tool, as the peaking and troughing can stretch for months. It would be realistic to accept the current market heights as an indication that past (recent gains) are unsustainable and that a reversion to mean return may ensue. Comparing the stock market with Unemployment Claims helps support the thesis that markets revert to their long-term average returns.

    Baseline Analytics has introduced "Flash Updates" which can be accessed for free on our home page. Flash Updates include timely trading and investing ideas, many of which arise from scanning over 5,000 stocks on a daily basis to identify fresh market opportunities. Please visit and bookmark our home page and visit frequently.

    Visit our new performance reports which track our TrendFlex signal performance vs. the S&P 500 and is now updated weekly.

    Aug 30 9:51 PM | Link | Comment!
  • The Best Of Technical And Fundamental Stock-Picking Criteria

    Baseline Analytics Prime Technical Leaders shares the best of fundamental and technical stock-picking criteria. This week's rather lengthy list is being made available free to all of our newsletter subscribers. Click here for this week's list.

    What does it mean to be a Baseline Analytics "Prime Technical Leader?" The following hurdles must be met:

    1. Attractive fundamentals, earnings performance and growth. Stocks that make the cut typically represent growth at a reasonable price (GARP), tend to beat earnings estimates and share a return on equity (ROE) in the double-digits. Many pay dividends.
    2. Last week's average trading volume must be 10% or higher than the prior 50-day average trading volume.
    3. The stock must display strong technical indicators, such as trading above its 50-day moving average plus a favorable short-term moving average cross, indicating building momentum.

    Subscribers to Baseline Analytics receive the Prime Technical Leaders List weekly, as well as a targeted subset of the list to simplify investment selection and portfolio management.

    Be careful out there! The stock market is sorely in need of a break, so set your expectations accordingly and preserve capital. But don't ignore strong companies with attractive prospects, and keep a buy list such as the Baseline Analytics Prime Technical Leaders handy!

    Jun 22 9:57 PM | Link | Comment!
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