S+P History Lesson
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Hedging Your Bets With Matt Davio:Â S&P
History Lesson
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Friday
the S&P 500 closed at a new 4-year high. So how does the current S&P 500 rally
rank? To answer this question and to provide some perspective, all major S&P 500
rallies of the last 73 years are plotted on today’s chart. So what does this
chart show? Several things… Over the past 73 years, the S&P 500 has begun a
major rally 20 times or once every 3.6 years on average. Second, most major
rallies (90%) resulted in a gain of less than 150% and lasted less than 1000
trading days (4 years). With the S&P 500 up 57.8% as of today, the current rally
would be classified as relatively long in duration but slightly weak in
magnitude. Stay tuned…Â Â Â Â
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           The VIX again
closed Friday at a new low, below 10.5 on the index. Amazing how little fear
there is out there in the market. It is rosy everywhere you look and inflation
is non-existent — if you believe the government.
           However, I do wish
Uncle Sam would notice the increases my family has seen in energy, real estate,
education, and healthcare, all of which have exploded in the past 5 years. How
any person could not feel these rising in costs is beyond my reasoning, and with
real wages flat to declining, I must admit, my sense of worry is higher than
normal. I just call it like I see it, and I don’t see a pretty picture for the
long term of this fiscal nation.Â
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Navarro’s Broad Market Outlook: Sitting Tight
It’s hard to deny the
semi-strength of this market as the S&P hits a four-year high. Yet when I turn
to review the IBD 100, I can’t help but pause when I see that housing and
construction-related stocks have grabbed almost half of the top 20 spots — and
Google is sitting at the top of the heap. Bubbles (or at least froth) do not a
strong foundation for growth make.
So let’s hear what Mr.
Greenspan has to say to Congress this week about our future. It will literally
be his last words on Capitol Hill as Chairman and in a week slow on data, it
will be the main event. (On the data front, housing starts and the Index of
Leading Indicators are about the only excitement for the week — all the more
reason why Greenspan’s mutterings will rule the day.)
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Portfolio Musings: Penny Ante Stuff
Opened small positions in a
bunch of pennies. Those worth mentioning include: ARTX, NTOP, PDYN, TRPH, TMTA,
with the last two being the solidest technically.
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Sitting on GERN, ASTM, SVA —
long term plays while old pal CPTCQ.OB broke back over three bucks. After
doubling up last week on IBIS, I had to cut it back in half to avoid a loss.Â
Hate to turn a winner into a loser. VION had another nice week.
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CHIR continues to disappoint —
more news from the company about its limited ability to provide flu vaccines
dragged it down. Glad my leaps go out to 07 over two flu seasons….
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My two losers ARDI and ZILA
continue to base. Methinks this is the week for me to double down on ARDI in
preparation for earnings call coming up. One thing I will do is look carefully
at the earnings of SIRF on July 26, two days before ARDI. A good SIRF report
may augur well for ARDI as they travel in similar circles.
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DISCLAIMER: This newsletter is written for
educational purposes only. By no means do any of its contents recommend,
advocate or urge the buying, selling, or holding of any financial instrument
whatsoever. Trading and investing involves high levels of risk. The authors
express personal opinions and will not assume any responsibility whatsoever for
the actions of the reader. The authors may or may not have positions in the
financial instruments discussed in this newsletter. Future results can be
dramatically different from the opinions expressed herein. Past performance
does not guarantee future performance.