Van Meerten's picks

This week showed a little promise at the end but I'm not holding my breath. Lately we've had a lot of strong Fridays that ended up being a disappointment the following week. Let's step back and forget about the headlines and pundits on TV and use our 3 yard sticks to rationally evaluate where we stand. We use Barchart as our data source and use 3 yardsticks because no single one works all the time. I learned something from the Supreme Court - if you have an odd number you never have a tie. Let's see where we ended.

Value Line Index -- Contains 1700 stocks so its broader than the S&P 500 or very narrow Dow 30 -- recovering but still weak

1 - Index down .11% week over week
2 - Index down 5.70% for the last month
3 - Barchart short term 20% sell -- overall 1 buy, 4 holds & 8 sells
4 - Trading below its 20, 50 & 100 day moving averages
5 - 14 Day Relative Strength Index 45.69% and rising -- a bright spot

Barchart Market Momentum - Contains approximately 6000 stocks -- Percentage of stocks trading above their Daily Moving Averages for various periods -- recovering slightly

1 - Friday only 38.16% close above their 20 DMA, over 51.15% closed above their 50 DMA, only 44.91% closed above their 100 DMA

2- Last Week only 32.70% closed above their 20 DMA, only 49.22 closed above their 50 DMA, only 52.52% closed above their 100 DMA

3 - Last month over 79.21% closed above their 20 DMA, over 72.16% close above their 50 DMA, over 52.33% closed above their 100 DMA

Ratio of stocks hitting new highs/new lows for various time frames -- 1.0+ bullish, 1.0 neutral, below .99 bearish -- still bearish

1 month new highs/new lows -- 216/666 = .32
3 month new highs/new lows -- 127/323 = .39
6 month new highs/new lows -- 84/255 = .33

Summary and Investment Strategy -- The week looked like we may have found a bottom. I'll continue to trim from my portfolios stocks that have a downward momentum and I might add back new stocks if the Barchart Market Momentum keeps improving and the Value Line Index gets a 14 day Relative Strength Index above 50%.

Jim Van Meerten is an investor who writes on investing here and on Barchart Portfolio Blogs. Please leave a comment below or email JimVanMeerten@gmail.com.Disclosure: No positions in the stock mentioned at the time of publication

Comments: View Comments |  Friday August 27, 2010