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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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  • A Breadth Of Fresh Highs

    Baseline Analytics TrendFlex Score includes several market indicators focused on internal market strength. These breadth indicators exhibited rather lofty jolts on Friday 3/20, hitting extremes that not only reinforce the strength of equities, but that potentially point to some frothiness in the "risk-on" trade. The charts below depicts several measure of market breadth (all of which are variably-weighted components in the TrendFlex Score).

    (click to enlarge)

    The chart above is the NYSE Advance-Decline indicator. Note the strong uptrend maintained above its moving average, pushing to meet up with its high from the beginning of March. No internal weakness here. As I was seeking published commentary on the NYSE Advance-Decline, I found a rather noteworthy analysis from Greg Schnell, particularly interesting for its chart of the 6-year cycle of the S&P 500. That cycle, which plots a market low in the mid-2015 timeframe, was drawn back in December 2013, and markets have admittedly behaved a bit more bullishly since. Also note Greg's reference to the "80/90's period where we stay nice and strong." Something to keep in mind today.

    The next chart is the High-Low Percent of the S&P 500. This breadth indicator measures the percent of new highs of the S&P 500. It is based on a percent of net new highs (number of new highs minus number of new lows) divided by the total number (500) of stocks in the S&P 500. In all of these charts we plot the 63-day exponential moving average, essentially a three month average of the indicator. The $SPXHLP (which is a 5-day average to smooth out the variability), is reaching toward 12% (its recent high was at 14% prior to the market heights reached at the start of March). A bearish reading of this breadth indicator is below 0 (a number of market technicians view -2 and lower as a truly cautious level for bulls).

    (click to enlarge)

    Our final breadth chart is the NYSE Advance-Decline Volume line. This breadth indicator is based on Net Advancing Volume, which is the volume of advancing stocks less the volume of declining stocks. So higher-volume stocks (i.e. Walmart) have a heavier weighting in this calculation, which basically favors the large-cap stocks (the Advance-Decline line in the first chart above favors small to mid-cap stocks). Click here for a primer on AD and AD Volume indicators by Arthur Hill.

    (click to enlarge)

    We look to market breadth for signals that the uptrend is losing steam. As fewer stocks participate in a market rally, breadth will begin to flatten and decline. Note the chart presented by Greg Morris below. The Nasdaq Composite reached a new high in November 2007, while breadth peaked in March 2007.

    (click to enlarge)

    Looking at today's chart of the Nasdaq and its A-D Line (below), it appears that 2015 is moving in the right direction, but the trend in the A-D line prior to February 2015 is a bit non-committal.

    (click to enlarge)

    We'll watch this one carefully to assess any continued divergence, as these market breadth indicators remain invaluable to gauging the internal strength of equities.

    Our TrendFlex Score includes four measures of market breadth. Subscribers receive an update on the TrendFlex Score each week, as it measures the risk of a change in the market trend.

    Mar 21 1:04 PM | Link | Comment!
  • Baseline Analytics Market Tour Update

    New highs and strong bullish indicators wrapped up this week's market activity. There does not appear to be any noteworthy level of extreme complacence in the markets; we will view these new highs as continuing to be supportive of positive market activity.

    The S&P 500 broke out of a consolidating pattern from the 2080 area and broke into the 2100's with a close at 2110. "Known Sure Thing" -KST is solidly positive, having printed a positive cross-over in late January when the S&P 500 was in the 2060 area. VIX and Put Call, although at relatively low levels, are not quite at extreme lows that would suggest a high level of complacency and a shift to the downside in the short term trend. See the chart below:

    (click to enlarge)

    Internal market strength is supportive of the uptrend. Note that the advance-decline ratio and new highs are positive and stretching to new indicator highs. In addition, the NYSE Summation Index has surpassed the 400 level, commonly viewed as a bullish development, as it too confirms the strength of this uptrend:

    (click to enlarge)

    Finally, our economic technical indicators are bullish. We regularly review the price relationship between corporate bonds and intermediate Treasuries. That relationship is positive and has established a firm uptrend after a several-month hiatus of consolidations. In addition, small cap stocks and consumer discretionary stocks have been outperforming large caps and consumer staples, respectively, further supporting the "risk-on" trade in equities.

    (click to enlarge)

    Although some trading-range activity in the indices would not be abnormal at this stage of the bull market, we would continue to seek opportunistic long positions as the character of the stock market likely will shift to a "stock-pickers" market as the rally moves forward. We are inclined to support bullish trades for the next 4-8 weeks with sensible stops on long positions.

    Visit our expanded market coverage and timely investment opportunities at Baseline Analytics.

    Tags: SPY, market trend
    Feb 24 8:59 PM | Link | Comment!
  • New Month, New Dividend: 3 Top Choices For The Week Of Jan 5th.

    A new month brings new ex-dividend stocks. Each month, Baseline Analytics screens the month's upcoming ex-dividend stocks to identify those representing the most technically-attractive opportunities. Next week, 28 stocks have met our technical criteria, representing attractive income-generating opportunities.

    Here are our top 3 choices for the week:

    Gentex

    Gentex (NASDAQ:GNTX) goes ex-dividend on Monday with a 1.7% yield. This automotive products company sports a 21% Return on Equity and has beat its earnings estimates for the past four quarters. GNTX surged above its 50-day moving average with its most recent earnings beat. A bit expensive at a forward PE of 17 and a PEG Ratio of 3.15, GNTX could still offer an attractive industrial option for your portfolio.

    (click to enlarge)

    Monsanto

    Monsanto (NYSE:MON) goes ex-dividend on Wednesday with a 1.6% yield. MON currently sits at its 50-day moving average, representing an attractive entry point. Monsanto has a Return on Equity of 26% and a reasonable PEG Ratio of 1.60. MON earnings announcement for the November-ending quarter is on Wednesday. Given its earnings miss at the August-ending quarter, we're looking for a meet or beat this time.

    (click to enlarge)

    Ratheon

    Ratheon (NYSE:RTN) goes ex-dividend on Monday and sports a 2.2% yield. The defense technology company has beat earnings estimates over the last four quarters and is attractively-valued at 9/8x EV/EBITDA and a 20% Return on Equity.

    (click to enlarge)

    To see the full list of next week's technically-attractive ex-dividend stocks, sign up for our free 30-day trial (no credit card needed). Click here to get started. Visit Baseline Analytics and learn about our TrendFlex family of market trend indicators, as well as our ETF timing opportunities and StockStash selections.

    Tags: MON, RTN, GNTX, Dividends
    Jan 03 1:52 PM | Link | Comment!
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