These are the sectors (based on ETFs) that have topped and though advancing with this leg, have not exceeded their bull market highs.
BBH biotechs (topped in 11/05)
BDH broadband (topped in 4/06)
HHH internet (topped in 1/05)
OIH oil serv (topped 5/06)
PPH pharma (topped 6/03)
SMH semis (topped 1/04)
HGX housing (topped 7/05)
HUI gold (topped 5/06)
DJT transports (topped 5/06)
There are other sectors, like RUT, MID, NDX, etc, that have exceeded their bull market highs, but are not advancing at the same pace as SPX, DJIA, OEX.
The biggest benefactors of this current leg appears to be OEX, and the strongest sector appears to be financials, lead by BKX, XBD, etc. TTH - telecoms, also appear to be doing well.
Contrast this advance to the advance between 03 and 04, and one will note that practically all of the sectors were advancing uniformly.
Yes this is a maturing bull market. The A/D cumulative line still appears healthy (ie continuing to advance), but price does not seem to reflect the advance, at least for many sectors.
This is just to continue the debate whether this leg is a wave 3, which, by the book Elliott Wave Principle states practically all stocks should participate, vs a wave 5, which follows wave 4 where many sectors should have topped, and thus provides suspicions to the nature of this advance.
If you saw the Gann video I posted the other day, you will note that they categorize bull market runs by lengths, and this particular bull market is near the top end of the curve in duration.
If this leg is indeed a wave 3, then by deductive reasoning, we must say that the run from 2003 to 2004 was a wave 1, and since wave 3 is by far the biggest gainer in points and usually longest in duration, it would imply that we have at least another 6 months of advance to go (not to mention about another 200 SPX points).
Ofcourse we could get a second wind and suddenly all these lagging sectors may catch up, but it would appear to me that is unlikely.
Again the ONE thing that would seem to be the biggest argument against this being wave 5 is sentiment, as it is surely lacking by some measures.
But lets examine this for a minute. There is evidence that by some measures, froth seems high:
1. All the brokerages believe this year will be great.
2. Rasmussen poll is showing dec 04 level enthusiasm.
3. Future traders bull % hit the highest level of the bull market.
4. II polls hit near dec 04 highs.
However, there are other measures where froth isn't so high:
1. FF polls
2. AAII polls
3. Lowrisk polls
4. ISEE measure low.
5. Record short positions.
6. AGM fund flows low.
I believe these items can be corrected very quickly with a short spurt upwards, and perhaps thats what it'll take to make the top if this is still a wave 5.
Remember that a bear market can be relatively short in time and price. It does not have to be a devastation like the kind that fell on 2000 to 2002. Many expecting a protracted bear market may be in for a disappointment, not sure.
Anyways, putting some thoughts in writing, for my blog, to be replicated here for discussion if anyone else has thoughts.
List of sectors that have topped out (so far)
Started by
dcengr
, Jan 16 2007 10:20 PM
7 replies to this topic
#1
Posted 16 January 2007 - 10:20 PM
Qui custodiet ipsos custodes?
#2
Posted 16 January 2007 - 10:45 PM
OTIS.
#3
Posted 16 January 2007 - 11:03 PM
And here is a guy giving 7 reasons to sell. Go figure ...
http://www.safehaven...rticle-6712.htm
You only need 1 reason to sell, and that's dropping prices.
So far, there's no sign of that
Qui custodiet ipsos custodes?
#4
Posted 16 January 2007 - 11:32 PM
#5
Posted 17 January 2007 - 12:18 AM
To illustrate the sentiment according to COT, this chart shows the NDX future traders bull %. This is constructed by taking the # of traders with long positions divided by # of traders long and short positions.
The data is further separated into commercials, large traders, and total reportables.
As the chart shows, the NDX traders hit a peak bullish 66% back near the top in december. This was the highest reading of the entire bull market for NDX traders.
Not shown, but SPX traders show similar peak bullish % thats only rivaled by the high in 3/03.
If 3/03 corresponds to wave 3, then we would expect large bullish % as many recognize the start of wave 3 and participate. The fact we have even higher bullish % (at least for NDX traders) maybe a sign that this is wave 5.
But as you can see, the bullish % has moved down quite a bit from the highs in december, and are now at more tipid level at 56%. This implies that large traders are ridding longs (perhaps going flat or short), but there is NO PRICE DECAY at this time. That would seem bullish to me, as there's adequate liquidity to absorb the dumping by the large traders. If the large traders decide to load up again, then prices will push up higher.
The data is further separated into commercials, large traders, and total reportables.
As the chart shows, the NDX traders hit a peak bullish 66% back near the top in december. This was the highest reading of the entire bull market for NDX traders.
Not shown, but SPX traders show similar peak bullish % thats only rivaled by the high in 3/03.
If 3/03 corresponds to wave 3, then we would expect large bullish % as many recognize the start of wave 3 and participate. The fact we have even higher bullish % (at least for NDX traders) maybe a sign that this is wave 5.
But as you can see, the bullish % has moved down quite a bit from the highs in december, and are now at more tipid level at 56%. This implies that large traders are ridding longs (perhaps going flat or short), but there is NO PRICE DECAY at this time. That would seem bullish to me, as there's adequate liquidity to absorb the dumping by the large traders. If the large traders decide to load up again, then prices will push up higher.
Qui custodiet ipsos custodes?
#6
Posted 17 January 2007 - 07:04 AM
Let me try and complicate things even more.
Number one...I don't even know if the count is any good but am I wrong if I said this may be the backbone to the economy right now and may have global implications if/when it starts to dive?
Basic Materials Sector and what it is made up of:
http://biz.yahoo.com...icmconameu.html
Click Here to see Full Sized Image
Number one...I don't even know if the count is any good but am I wrong if I said this may be the backbone to the economy right now and may have global implications if/when it starts to dive?
Basic Materials Sector and what it is made up of:
http://biz.yahoo.com...icmconameu.html
Click Here to see Full Sized Image
#7
Posted 17 January 2007 - 08:11 AM
Many tens. Very seductive. When was the all-time high of +10's?
#8
Posted 17 January 2007 - 09:59 AM
Many tens. Very seductive. When was the all-time high of +10's?
not sure I've ever seen that many 10's before in the 10+ years I've been following Henry's KISS system
that's a true inverse crash warning.