Keys To This Week, May 4th 2009
The US Stock Market
The following is an excerpt from our Monday May 4th Keys To This Week report, in which we displayed and discussed relative performance and investor sentiment in the Technology Sector.
Keys To This Week, one of 6 different reports that Asbury Research produces for subscribers, is a weekly report that provides a bullet-pointed list of key factors that are most likely to influence the direction of the US stock market and market sectors, US interest rates, and the US Dollar.
Keys To This Week, March 4th 2009
The US Stock Market
Key # 2 (of 8): Relative Performance
The NASDAQ 100 (NDX) has been technically overbought versus the broad market S&P 500 (SPX) since mid February. More recently, the upper and middle panels of Chart 1 below show that the PHLX Semiconductor Index (SOX, which tends to lead the NDX) has also become technically overbought versus the SPX.
Chart 1
The gray vertical highlights between all three panels show that previous instances of this have led both periods of relative underperformance by the SOX and coincident outright weakness in the SPX. Assuming that history will repeat, these data suggest that the March rally in the S&P 500 is very close to completion.
In addition, the latest data through Friday continues to show that 29% of all sector bet-related assets are allocated to the Technology Sector (according to our own metric based on the assets invested in the 18 Rydex funds, Chart 2) -- this is almost double the 10-year average of just 17%
.
Chart 2
The last time the percentage of assets invested in Technology was this high was at the end of Q2 2000 -- right as the US broad market was establishing a pretty important top. Historically, this type of one-sided bet on Technology has coincided with near to intermediate term market peaks, not the beginning of sustainable new bullish trends.
Continued...
Since that report was distributed on May 4th, the NASDAQ 100 has underperformed the S&P 500 by 6%. The S&P 500 peaked four days later on May 8th, at 930, and has since declined by 51 points or 6%.
The rest of this report can be viewed on the Asbury Research Website by CLICKING HERE.
John Kosar, Director of Research, also discussed this over-invested extreme in the Technology Sector in a little more detail on CNBC's Fast Money Halftime Report on May 13th.
Professional Investors can request a 2-week trial of our research by CLICKING HERE or by calling 224-569-4112.
Individual Investors can request pricing information and a sample report by CLICKING HERE.
Asbury Research provides a unique blend of technical, behavioral and quantitative analysis from a 25-year veteran of the US financial markets. Our research is directed to a small group of sophisticated investors that understand the value of limited distribution, independent thinking and personalized attention. Asbury Research offers the Asbury Indicator Matrix™(AIM) which integrates price action, investor sentiment and intermarket analysis to produce a forward-looking, multi-dimensional assessment of WHERE the major US financial markets are headed, WHAT market factors are most likely to affect their current price trends, WHEN these trends are likely to change, and WHY, and HOW to determine when they do. Our clients include the Chief Investment Officers, Portfolio Managers and Head Traders for some of the most prominent portfolio and hedge fund managers in the world.
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