Is the S&P500 ‘Dead Money’ for Now?
- Posted by JC Parets
- on January 2nd, 2013
Technician Carter Worth of Oppenheimer is out this week calling the S&P500 “Dead Money, at best”. I thought this was an interesting take on a large cap index comprised of 500 American companies. Remember, this is a cap-weighted index, making the largest companies more important than the others. As opposed to the Dow Jones Industrial Average that doesn’t care how big your market cap is, just the price of your stock.
“The thesis is a continuation of a view that began in late November. Worth reasons that the S&P 500, at best, is likely to remain stuck at the 1,400 – 1,430 level for weeks and might head back down to 1,350.
‘The primary issue we have with the market is the large and growing number of ‘Bullish-to-Bearish’ Reversals found among important super cap stock composing the S&P 500,’ said Worth.
Worth reviewed the chart patterns of a dozen of marquee names and points out that all have taken on ‘rollover casts’ with their respective smoothing mechanisms flattening or already sloping down.
His analysis includes stocks like Coca-Cola ($KO), IBM ($IBM), Apple ($AAPL), AT&T ($T), Philip Morris ($PM), PepsiCo ($PEP), Merck ($MRK), Colgate ($CL), Microsoft ($MSFT), Mondelez ($MDLX), Target ($TGT), Wal-Mart ($WMT), and Verizon ($VZ).
With regards to the S&P 500 itself, the analyst described it as ‘walking the line [and] trying to maintain its uptrend.’
‘Any weakness in the intermediate period ahead and it becomes much harder to claim that the market’s upward trajectory is intact. We ourselves are skeptical,’ concluded Worth.”
He makes some valid points. But rather than taking this as a negative, I think we should maybe feel somewhat fortunate in that this is becoming more and more of a stock pickers market with each passing day. Remember 18 months ago? Very different. Remember 3-4 years ago, the Risk-on/Risk-off hysteria? Straight silly.
So some of these humongous companies may not look so good. Big deal. Some of the others do. And some smaller ones that aren’t even in the S&P500 look great. And some of the little guys look like garbage. How much more fun is this?
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J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) in 2008 and now actively manages money incorporating Technical Analysis and Behavioral Finance into his practice More
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