Sep 1, 2011

September Sentiment



Last week was very volatile for the markets. Obviously the bottom has been formed, at least short term one, since S&P500 returned 9.6% in just 7 days. Right scale of the graph shows the value of the index and the left indicator. The indicator on the chart shows, however, that there are still room for growth after only 29% of companies in the index trade over their 50 day moving average. Values ​​below-1SD (standard deviation) is a signal to buy, as seen in the previous two corrections. This indicator has shown historically that can induce relatively accurate entry levels.

% of S&P 500 Stocks Above 50-Day Moving Average

Still the rally is fragile since investors are cautiously buying after sharp selloff seen previous weeks. Most attractive at the moment are blue chip companies with stable growth prospective. Therefore we can not expect a sharp return rather moderate growth, which will depend mainly on data on employment and unemployment and potential of the world's leading economies to generate growth that can lead us out of crisis.


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