Sunday, January 8, 2012

Running a Little Hot

As I write this the Denver Broncos are holding a 20-13 lead over the Pittsburgh Steelers. No idea if they can hang on, but it would be a huge upset if they do!

I am moving in slow motion because I may have overdone the beers during last nights New Orleans Saints second half explosion and win over the Detroit Lions.

Running a Little Hot
I have been pretty suspect of the rally last week. Besides low volume, figured that was going to happen, the names running the hardest were some of the more beat down names with heavy short interest. Overall, short interest is at multi month lows, and the air pocket from the Tuesday gap up is a real weakness for the market should any drop happen. There's not much underneath holding things up. Add to all that the level of bullishness is very high.

I wrote a post last Sunday where I discussed keeping an eye on "safe" companies and sectors should money start coming out of them. I wrote:
It's natural and expected that in a move to a more aggressive stance on the market, money will be pulled from defensives and put to chase after other assets.....
If prices are dropping for BOTH the defensives and the general markets then you have to respect that as a strong signal. In no way has that slight blip been confirmed, but you need to be aware of it.

Up to date comparison charts are in order.

RAI vs S&P 500:
Weakness in the tobacco company RAI for sure, but if the S&P is topping this is not that great a thing.

Utility Index XLU vs S&P 500:
Again, seeing the same thing.

Another item to watch is when Biotech as an industry gets hot, it can mean it's late in a uptrend cycle. Now there has been a ton of news that has been supportive of the sector so one has to keep that in mind. Here is the Nasdaq Biotech index (^NBI) against the Nasdaq for the last 6 months:
Again, it's looking a little late in the run here by this measure by how much the biotech index is outpacing the overall Nasdaq.

It's my belief that some kind of correction is very close. I could be wrong, and if I am these charts above will change to show that a longer rally is at hand supported by money movement.

Have a good night.


Jennifer Hillier said...

Had a little fun last night, didja? It's playoffs time, all should be forgiven.

Huge Broncos win! Will be rooting for them next weeks against your Pats. Be prepared to console me.

EconomicDisconnect said...

You are gonna root against my team? Thought we were close buddy??! I see how you roll.

David Batista said...

Well, I'll be rooting for your Pats. Totally despise the Broncos (sorry Jen!).

EconomicDisconnect said...

YEAH!!!!! David rocks.

GawainsGhost said...

I will never hear the end of this. Ever since I bought the NFL Ticket on DirecTV two years ago, my mother has become a football junkie. And here's the worst part, all three of her teams--Texans, Saints and Broncos--advanced in the playoffs.

Every time there was a commercial break, she came scampering down the stairs and burst into my condo. "Did you see that play?"

Uh, no, I watching Special Victims Unit.

"This is so exciting! I love football. All of my teams are winning!"

Wrap your mind around this little stat. In 16 regular season games, the Steelers allowed an average of 179 passing yards a game. Tim Tebow threw for 185 in the second quarter alone.

I bought my mother a Hoodie-Footie for Christmas this year. It's about all she wears. Picture this. A 73-year old woman walking around in pink pajamas, singing "Tebow! Oh, oh, oh. Tebow!"

Then she says to me, "Everyone is shocked when one of my teams lose. No one is shocked when your Cowboys lose."

Take me now, Lord.

Jennifer Hillier said...

Gawains, that is the funniest story ever!

I already know the Broncos will lose. I'm a fan of Tebow (come on, what woman isn't?), but I don't have a dog in this fight. I can't watch sports without someone to cheer for, though.

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Nice charts