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MV Weather Report: Late Showers Ruin S&P's BBQ


Rain or shine, we review the day's biggest stock stories.


It was chop and slop on Wall Street today as stocks flip flopped around after being up for eight of the past nine trading sessions.

After making a new intraday high at 1074, the S&P 500 closed lower by -0.30% to 1065.
Even though the index closed unchanged, it really felt like a lot of stocks didn't want to go down. Case in point is how Apple (AAPL) and Google (GOOG) traded very strong. As did the banks: Bank of America (BAC), Citigroup (C) and JPMorgan (JPM).

In last night's article Professor Smita Sadana mentioned that her Oscillators were at extreme readings. Today it was more of the same. Below is a post by her from today's Buzz & Banter.

"The Standard and Poors Short-Range Oscillator was 12.4 at the close of yesterday. It's at the highest level that I've seen in the last 20 months of diligent tracking.

"While it's a testimony of inordinate strength (in case any more proof was needed), buyers seem to be tripping over themselves to get in. Based on these overheated conditions, the dip that many have been waiting for, might be here soon. But if recent history is any guide, it might turn out to be more an opportunity for the buyers, than the sellers. (Some of my other proprietary indicators are also breaking into uncharted territory. Historically, similar readings preceded shallow declines)

"In the S-R Oscillator, there have been two other instances of a reading over 11 in the last 6 months.

"3/23/09: A small decline ensued (823 to 806 on S&P-500)

"7/29/09: No impact. The market just went in a short trading range till the overbought readings worked themselves off, and then continued higher."

I do agree with Smita, any dip here is most likely a buying opportunity and I would expect one to come soon. It looks like it even started today.

Finally, Chief Minyan Todd Harrison has some interesting stats that he posted on today's Buzz and Banter.

"As further grist for the mill, the savvy seers at Bespoke Investment Group have a note out this morning that touches on a similar topic. They peaked at periods when the S&P traversed from 20% below the 200-day to 20% above.

"Since 1928, it's happened three times--1932, 1938 and 1975--and each time, the S&P was lower one, three and six months later every time but--and this is a big 'ol but--the average return, one year later, was 13.3%, with positive returns two out of three times.

"'If the S&P follows the historical script,' they opined, 'the typical fourth quarter rally could face some stiff headwinds.'"

Heads up, tomorrow is options expiration day.

Have a good night!

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Position in BAC

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