Active Trader Update

Try Jim Cramer's Action Alerts PLUS
CLICK HERE NOW

IRA Investing: Market Indicators Weaken

05/25/07 - 03:46 PM EDT

Richard  Moore

This column was originally published on RealMoney on May 23 at 2 p.m. EDT. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Just on the heels of my praise for the internal strength of the market, the indicator I presented (the advance/decline line) exhibited a negative divergence last week.

Even though the market averages were up strongly, there were more stocks declining than advancing for the week.

So far, this is only a one-week phenomenon, but it certainly bears watching.

Indicators Weaken

I still view the long-term market outlook as bullish, but there has been some further deterioration in the indicators that I use to forecast intermediate-term (two- to six-month) market moves.

I've only got one bullish indicator left, and it has declined from very bullish territory.

Let's look at it now.

Below is a five-year chart of the S&P 500 (black) and a 10-week moving average of put volume divided by call volume (red). The green lines relate to the three-year average of this indicator and its standard deviations.

PUT/CALL RATIO VS. S&P 500
Click here for larger image.
Source: TheAstuteInvestor.com

These volume figures include options on the indices, so, as buying puts on the averages has gained popularity, there has been an upward trend in this indicator. After a surge in put-buying related to the March decline in the market, this ratio has now subsided to a level that is still positive but just marginally so. Also, the direction of the indicator is clearly down, and it will fall into neutral territory soon if the market holds up.

With only one indicator bullish and two indicators neutral, my cash target has been raised to 8%. The actual cash position in my IRA was 7.1% at the end of last week.

A TBS International Adventure

Last week was the rebalance date for the five stock screens I have been using since last October. This rebalancing is a monthly screen that changes a few parameters in my main screen. Specifically, instead of relative strength benchmarks, I require that stocks be within 7.5% of their 52-week high. I also require that the ratio of average 10-day volume to average three-month volume be as high as possible.

Previous «
1 2 3
At the time of publication, Moore was long American Dental Partners, Apria Healthcare, Ameriprise Financial, Amerisafe, Becton Dickinson, Buckeye Technologies, Cal-Maine Foods, CF Industries, Consolidated Graphics, O'Charleys, CGI Group, ,Integramed America, Kinetic Concepts, Methode Electronics, New Frontier Media, Quadramed, Scholastic, Sauer-Danfoss, S&P Depository Receipts, TBS International, Boots & Coots, W-H Energy Services, Warnaco Group, Crane, Gardner Denver, Nova Chemicals, PepsiAmericas and Teleflex, although positions may change at any time.

Richard Moore, CFA, has 40 years of experience in various facets of the investment business. He has been employed by banks, mutual funds and investment advisory organizations during his career and has also owned retail and service businesses. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Moore appreciates your feedback; click here to send him an email.


Previous Story

How to Spot the Top

Active Trader Update


05/24/07
Microsoft Put to the Test

The stock is now attempting to break through its January high.


05/21/07
Raise Money Using a Self-Directed IRA

This clever twist on retirement fund investing could draw the patient investors business owners love.


05/16/07
Don't Retire Poor -- Avoid These 10 Pitfalls

Make sure you have enough money when you need it.


05/16/07
IRA Investing: Mid-Term Still Looks Bullish

The CBOE Put/Call Ratio points to an upward market direction, so portion cash appropriately.


05/11/07
The Fund Manager Shuffle

Fidelity and Pioneer are among several fund companies to change fund managers in April.


04/23/07
Tax Tips for 2007

It may be too late for this year, but here are seven big tax levers for entrepreneurs to plan out now.


05/19/08
Cramer on Top Searched Stocks: Yahoo!

Yahoo! is among the most searched stocks on TheStreet.com. Here's what Cramer had to say about the stock recently.


05/17/08
Jim Cramer's Best Blogs

Catch up on his thinking on the hottest topics of the past week.


04/26/08
Coming Week: Make or Break

Investors will have to deal with a Fed meeting and another flood of earnings and economic data.


05/19/08
Top Rocket Stocks: Ensco

Ensco International and Echelon have the potential to move higher in coming days.


04/28/08
Monday's Analysts' Upgrades, Downgrades

See who made what calls.


05/19/08
Telecom Giants See a Savior in Video

The addition of video is helping telecom companies compete against cable and satellite companies.


05/19/08
Contract Expiration Tempers Oil's Rise

The June West Texas Intermediate contract reflects selling pressure ahead of Tuesday's expiration. But stocks in the sector are generally trading higher.


05/19/08
Analysts' Upgrades, Downgrades: Amazon

See who made what calls.


Your Recent Quotes: Quote Up0 | Quote Down0
Dow S&P 500 NASDAQ
Oil*
Gold
10 Yr
0.00%
%
%
%
Data delayed 20 min
Sign up for our FREE newsletters now.

Keep on top of the market and the critical information you need to make more profitable investing decisions.

  • Cramer's Daily Booyah!
  • Before the Bell

Privacy Policy

See All Free Newsletters

Premium Stock Ideas
Access Action Alerts Plus to find out Cramer’s latest picks now!