IRA Investing: A Volatile Market Still Looks Good

Last week, the market provided us with some thrills, and most investors lost some money as declining stocks outnumbered advancing issues by more than 4 to 1 on the New York Stock Exchange.

Nevertheless, my indicators really didn't signal any major changes one way or the other.

My longer-term indicators remain bullish.

The general sentiment of speculators and odd-lot investors remains negative and became even more negative last week.

Let's look at a chart of odd-lot activity; specifically, the following is a chart of odd-lot short sales divided by odd-lot purchases on the NYSE.

This is a five-year chart of weekly postings of this ratio, with the odd-lot short sales expressed as a percentage of odd-lot purchases in red. The S&P 500 is in black. The green trend lines relate to the three-year average of this indicator and its standard deviation.

Back in early March, after the market suffered a rather severe short-term decline, this indicator spiked up to just below 38%, an extremely high level that forecast a market reversal to the upside.

Last week, the odd-lot short-seller was at it again and the ratio shot up to more than 35%. This is simply a confirmation that sentiment remains very negative and that a bullish long-term stance is still warranted.

My three intermediate-term indicators did not change last week despite the roller-coaster market. All three remain neutral.

Click here for larger image.