Ian Woodward's Investing Blog

Stock Market in the Balance – Year-end RonIandex

Balance

The weak Year-end Rally doesn’t bode well for the New Year and we come to the last day of trading with the Stock Market in the Balance and can go either way from here.  All the Indexes are at critical junctures at or near their 50-dma, their 200-dma and at support or resistance lines.  Is it any wonder that the two little fellows in the picture are asking each other if they are going long or short in this market?   The Sectors that have outperformed this year are essentially defensive with Energy, Materials, Utilities, Consumer Staples and Healthcare leading and smatterings of Technology, Internet and Telecommunications Stocks more recently.  Chemical Specialty and Energy Alternative Stocks have been outstanding and despite their huge gains will likely confound us and go up further.  Stocks like CF, MOS, POT, TNH, TRA along with FSLR, JASO, ESLR, CSIQ and new found ASTI are all defying gravity.  Technology Stocks which are holding up well are MICC, CRM, VIP, SIGM (recently pummeled but starting a come-back) along with the perennial favorites such as AAPL, GOOG, RIMM, GRMN and BIDU.  The Steel Producers may be waking up again and that should mean that STLD, MTL, AKS and SID should continue to lead that group.  Throw in ISRG, FWLT, PCLN,  and we have a well rounded group of Leaders.  

One popular theory often offered at the end of the year is that stocks laden with profits as these have provided over the year are held into the New Year before selling off to avoid Taxes in 2007 and delay them into 2008.  I don’t subscribe to that notion, but for posterity sake I felt we should go out this year with our best shot at the RonIandex for 2007.  If you haven’t seen Ron’s Year-end Movie which is out today I suggest you do so post haste.  His focus on the Volatility Index (VIX) which as we well know has grown dramatically this past year and the “jumpy gaps up and down” these past three months demonstrates that this is a very tricky market and one must be extremely nimble and short-term oriented at the moment.  There is no traction to show a continued rally or for that matter a steady decline.    I have built on his ideas to develop a consolidated Index of this group of 26 stocks and we will see if they get hit hard or continue to show leadership into the New Year.  As we can see the Index has risen above its 4-dma which suggests that the Index is healthy but over-extended.  Note how this group has hardly come back to its 17-dma, but if it were to break it, it should show us there is rotation underway.  I have brought back my Sherlock Holmes Character to show what you should look for on the third chart, where I expect the Index to emulate its past performance into the 3-std deviation area before it finally gives up the ghost.  I have purposely included four or five stocks in the three groups of Energy Alternatives, Chemicals – Specialty and Steels, so that we should immediately see the rotation should that occur. 

The 2008 New Year RonIandex:Wharehouse

Chart

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As Sherlock Holmes is showing you with his magnifying glass, we can see that ideally he would like to see the Index climb just below the 2-std deviation line (red line) as it did in the October 2007 timeframe (dotted blue ellipse), but should it stray up to touch the 3-std deviation blue line that will be a strong indication that the Index is way too extended and it would be wise to expect a correction in this Index.    Happy New Year and Best regards, Ian.

2 Responses to “Stock Market in the Balance – Year-end RonIandex”

  1. George Loyd Says:

    Hi Ian – I am a trial user and will become a subscribed user on Jan 13th. In today’s blog you show a new folder “12292007 New Year RonIandex”. Is this available to users similiarily to the Woodward & Brown files or is it a work in progress? I have made a new folder but was wondering if there were more files available?

    Seasons greetings,
    George Loyd

  2. ian Says:

    Hi George: Welcome aboard and I am glad you are interested in the blog. The answer is no, as the file was concocted after I saw Ron’s Movie. Since you are a “newbie” I suggest you go back through the blogs and ferret for the genesis of what was the Iandex many moons ago and has been the RonIandex for the last ten years. From time to time Ron and I put together a list of leading stocks that guide us through a period of about three months which give us clues as to when the leaders tell us that there is rotation or all is well. We invariably do it at the seminars in March and October with the attendees participation. You might look down the list of available files under the User Groups and see if the last one generated in October is on the list.

    From time to time I put up a list of stocks on this blog such as the Blog Game Plan and the Last Chance for the Last Dance just to give inflection on which way the wind is blowing…long term subscribers look out for winky winkies, but then it is “Always Your Call!” I suggest you take the time to ferret back in the previous blog notes and make User Groups of them. The Index will tell you volumes of why the HGS Process works and more importantly the value of the HGSI software which records the foot prints in the sand…i.e., Chart Pattern for the consolidated INDEX. It’s my New Year’s present to you and the board, if they happen to find this in the Comments Section. Please give me feedback if you learn anything.

    The requirement is USUALLY no more than two stocks from any Industry Group, a maximum of 25 stocks and selected from about 15 different groups. As you read in this blog, I purposely chose more stocks from the three Wolf Packs that have led the market for the past 6 to nine months and are getting long in the tooth. However, this band of merry men usually go on to produce additional gains before they either pause to refresh and/or get beaten down. They are quality stocks with high ERG, and I am sure by now you have understood the value of high ERG stocks. Good luck and good fishing. Best regards, Ian.

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Disclaimer: Commentaries on this Blog are not to be construed as recommendations to buy or sell the market and/or specific securites. The consumer of the information is responsible for their own investment decisions.