Doing Math Without a Trend

Without a clear trend in stocks, it's just too hard to make money.
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Publish date:

May 21

After the markets close, I sit down at my PC and begin collecting data. First I write down how the indices fared, followed by statistics such as the advance/decline line and new highs and new lows. Try as I might not to form a quick opinion before posting my individual stock charts, I am usually not very successful. I often have a preconceived notion of how the charts will look based on the numbers I have just written down.

For the past two trading days, I have written down what I considered to be good A/D statistics. How could I frown on yesterday's numbers? Heck, they were better than the readings we had the day before when the markets were all higher.

So when I sat down to post my stock charts, I thought for sure I'd have a host of stocks to buy, stocks that had defied the drop in the major averages. First I posted the 30

Dow

charts and thought they looked mixed. I just knew that the rest of the pile (about 120 other names) would look much better than the Dow stocks. But when I had finished posting the charts and looked at my notes, the negative side had many, many more names than the positive side. How could that be? The A/D line was so good.

Then I went back over the charts: There were a lot of eighths and quarters on the upside but not much more. Then I did the math: For the past 10 trading days, the Dow has tacked on 80 points, the

S&P

7, yet the

NYSE

A/D line has lost 535!

It's not that the stock charts look so dire and awful -- it's just that they go nowhere.

McDonald's

(MCD) - Get Report

is not a good chart. It hasn't been for about a month, when it was 45. It is now 40. Big deal. It's like watching paint dry.

Four weeks to fall five bucks! It had one big day, it rallied 2 in a day and then dribbled back to where it rallied from. You cannot make money with action like that.

Even

Dell

(DELL) - Get Report

, with its disappointments, was trading right around here a month ago.

And the bullish charts go nowhere.

Colgate

(CL) - Get Report

has been a positive chart for a while now as well. A month ago it was at 96. It ran to 104 and back to 94. Yesterday? It landed at 97 and change. Oh boy!

There are plenty of other charts that are little changed from a month ago:

Sun Micro

(SUNW) - Get Report

,

Cisco

(CSCO) - Get Report

,

Intel

(INTC) - Get Report

and

Microsoft

(MSFT) - Get Report

to name a few. There are two charts that actually went somewhere in the past month:

IBM

(IBM) - Get Report

and

Hewlett-Packard

(HWP)

. Two out of a whole pile are not good odds.

This is also reflected in the volume. There is very little volume now vs. six weeks ago. Lack of conviction? I'd say it's more likely that the bulls are already long and waiting for the market to move stocks higher, yet it doesn't oblige them. We know there is too much bullishness out there: The

Investor's Intelligence

numbers show 60.7% bullishness this week, the same level we saw just about the same time

Nasdaq

was making its late January/early February highs. That is not the kind of sentiment we see just before a sharp rise in the market.

As for individual names, I am hesitant to suggest anything as the moves are all so benign. However, with that caveat, I would say the oil stocks have backed off well and

Chevron

(CHV)

seems to be groping for a bottom in here, as does

Exxon

(XON) - Get Report

.

Union Carbide

(UK)

is still a longer-term favorite of mine in the DJIA.

Outside the DJIA, I continue to write down Colgate and am hopeful that one day it will get going.

On the negative side in the DJIA,

American Express

(AXP) - Get Report

has begun to act poorly.

General Electric

(GE) - Get Report

could likely fall about 5 to 10 in here as it has now made a series of lower highs.

Outside the DJIA,

Anheuser-Busch

(BUD) - Get Report

should be sold up here. Notice the lousy volume on this rise.

Merrill

(MER)

is awful but has found some support here; sell bounces.

BankAmerica

(BAC) - Get Report

continues to trade poorly.

I read

Jim Cramer's

column the other day when he bemoaned that he'd bought Brazilian stocks too soon. What I found most interesting was that he had been right in looking for a rally in the market, and yet could not make money. It wasn't the Brazilian stocks; had he bought Cisco or

Yahoo!

(YHOO)

or Sun Micro he would not have fared much better. Most stocks seem to have no trend these days; they simply tread water. Without a trend it's too hard to make money. And without a trend, I remain cautious.

New Highs and New Lows

Overbought/Oversold Oscillator

Helene Meisler, based in Singapore, writes a technical analysis column on the U.S. equity markets on Tuesdays and Fridays, and updates her charts daily on TheStreet.com. Meisler trained at several Wall Street firms, including Goldman Sachs and Cowen, and has worked with the equity trading department at Cargill. At time of publication, she was long Hewlett-Packard, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback at

KPMHSM@aol.com.