Investors: Forget the Market Theories; Watch These Two Sectors to Determine Broader Strength
Considering semiconductors are in almost everything consumers buy, and all consumables have to be transported, these sectors typically lead economic expansion.
(The January effect, the quarter-end effect (window dressing), "sell in May and go away," leap-year phenomenon, Halloween Indicator, Super Bowl (AFC/NFC) winner correlation, and let’s not forget the lunar cycle theory. We could go on for pages with theories developed over the last few decades. Truth be told, anything can be verified with the appropriate statistical data, and this week, which involves the quarter-end effect, is packed with economic statistics: Tuesday: Case-Shiller Home Price Index, Consumer Confidence, Investor Confidence; Wednesday: New Home Sales; Thursday: Durable Goods, GDP, Jobless Claims, Manufacturing Index; Friday: Personal Income & Spending, Chicago PMI, Consumer Sentiment.)
Ascertaining probabilities based on empirical data – that is, on observation rather than theoretical data – is where my firm hangs its hat. Over the last two weeks we’ve discussed how the market (the S&P 500 Index (INDEXSP:.INX)) has broken above the technically important 1,425 resistance level. Conversely, our editorials have also discussed the necessity to see further empirical evidence to give credence to the longevity and conviction behind this move. Last week’s action, not seemingly apparent in the market’s return, was not good as the probabilities leading to the underlying confidence behind this move deteriorated rather quickly.
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