Originally Posted by
BobbyMorocco
I'm of the thought that we may be turning the corner into something else - at least here in NZ where extreme selectivity is being shown with only a few stocks causing the index to reach new highs. ATM, obviously being the main one. I wasn't investing when other Bull markets reached their peaks but from what I have read extreme selectivity is one of the main indicators that the tide is about to turn.
I have some figures from the most recent market peak on the NZX50, which occurred on 21/3/18. These figures suggest that things may not continue to go up for much longer.
- Only four out of the 50 constituents closed at their 52 week highs on that day. Supposedly less than 10% is not a good sign as this shows that not many stocks are contributing to the rally.
- Only 14% of stocks closed at or within 2% of their 52 week highs on that day. This is down from 38% on the Jan 5 NZX50 peak. Supposedly 30-50% is considered healthy in a bull market. Again 14% is showing extreme selectivity in stocks that are participating in the rally.
- The percentage of stocks above their 200EMA was 52%. This is down from 76% on the Jan 5 NZX50 peak. In a healthy bull market this figure would be 75-90% and they say that when this figure declines to 60% or less it's likely that we are very late in the bull market cycle and the tide could be about to turn.
They also say that weakness hits small caps first, followed by mid caps and then lastly the large caps.
Year to date returns on the NZX indexes are as follows.
- Small cap index down 1.39%
- Mid cap index down 2.73%
- NZX50 up 0.28%
- NZX20 up 0.81%
- NZX15 up 1.59%
- NZX10 up 2.88%
This goes to show the influence that ATM is having on the overall market. Without ATM the NZX50 would most certainly be down for the year.
All of this make me reasonably bearish on the overall NZ market at present, although a selected few stocks may continue with their rises for a while longer yet.
It would be nice to get posters like Hoop who used to line up his/her ducks and that would help give what seemed to be a fairly reliable indication as to whether the market was going to go up or down. If anybody knows Hoop can you please ask that they come back and share their thoughts???
Disc: I have more money out of the market than in the market and because I'm bearish at present I'm not really looking to add positions. DYOR. My numbers could be slightly off and may or may not be relevant. Time will tell.