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How is the Market Treating You?


Mirror mirror on the wall. What is the great divergence of them all??


OK. I woke up early and got to thinking. What am I doing waking up early after swapping a gazillion bonds yesterday? No clue. But let me get on with my divergence.

The party hats are now distributed and I could sense the elation as my ritual of hitting practice balls and stopping in our locker room for a cold one last nite. And I mean, people are elated about this new high in the Dow we will certainly get today or somewhere soon. So I asked the now rhetorical question to a few--'how is the market treating YOU?' Without an obnoxious tone, just one of curiosity, mind you. People didn't exactly crow about their portfolios setting records...And no, that didn't surprise me. No acrimony here, just honesty.

So I got to thinking (dangerous, no?). How many stocks in the Dow will make new highs along with the average making new highs? Can you guess? Well I did (I won't tell my answer because while pessimistic it wasn't pessimistic enough!). You must admit that the divergence is not only negative and could suggest that the index is improperly calculated, but also that it makes the case of why consumer confindence is so low. Consumer confidence is usually a coincident indicator with stock prices and for the most smart people own STOCKS not INDICES. So this data is rather important and suggests to me that many portfolio managers are underperforming and will continue to so do. Incidentally, this usually occurs before bear markets in my experience.

Below are the results and charts of my little study.

Dow Chart

There are four that I would consider 'close' to records - Altria (MO), American Express (AXP), Citigroup (C) and Proctor & Gamble (PG). Which leaves 26 of the 30 nowhere close to records. So if that isn't a divergence, I challenge anyone today to show me a better one. it makes one wonder about the index's composite and what it says about the economy. To me, it is a caution sign and like I said yesterday, I am a decided party pooper at this time.

Altria (MO)

American Express (AXP)

Proctor & Gamble (PG)

Citigroup (C)

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No positions in stocks mentioned.

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