Is the stock market more volatile than in the past? Many investors believe so based on the sharp intraday swings of recent days.

However, it really comes down to how you define volatility. If you look at the median monthly high-low ranges (in percent) for the S&P 500 index going back to 1980, and compare those averages to this year's values, only one month stands out so far.

In January, the range between the high and low was 13.70% (of the average of those two numbers), almost double the 7.60% monthly median going back 28 years.

The high-low range for this year's first month also topped previous highs of 13.09% in January 1987 and 12.62% in January 1980.

Continue reading Is the stock market more volatile than in the past?

Is the stock market more volatile than in the past? originally appeared on BloggingStocks on Thu, 20 Mar 2008 14:15:00 EST. Please see our terms for use of feeds.

In Gold: play the shares, not the metal?, I noted the apparent disconnect between the performance of mining stocks and gold and suggested that the shares may represent a better bet in the near term.

However, there seems to be an even greater disparity in another part of the commodity universe. Over the past 10 months or so, crude oil prices have soared by more than 70%, while energy sector shares have only risen about 5%.

To be sure, there are valid reasons why the stocks might not always track moves in the underlying commodity.

For one thing, the largest energy firms (with the heaviest sector weightings) have fully integrated operations (e.g. they explore for, pump, refine and market petroleum-related products), so a rise in the price of crude oil may not flow directly through to their bottom lines.

Continue reading Energy shares may be a better bet than crude oil

Energy shares may be a better bet than crude oil originally appeared on BloggingStocks on Wed, 19 Mar 2008 12:22:00 EST. Please see our terms for use of feeds.

As of Monday's close, the S&P 500 SPDR exchange-traded fund (AMEX: SPY) was down 12.25% for the year, buffeted by continuing turbulence in global credit markets and concerns over future growth prospects.

However, the relative performance of the major sector ETFs paints a far more confusing picture.

On the one hand, strength in materials and industrial shares, and weakness in the traditionally defensive health care sector, suggests that investors are not too worried about the outlook.

In contrast, strength in the consumer staples sector and weakness in technology shares indicates they are, in fact, concerned about what will happen to the economy.

So what does it all mean?

Continue reading Tread carefully when reading the market's tea leaves

Tread carefully when reading the market's tea leaves originally appeared on BloggingStocks on Wed, 19 Mar 2008 10:20:00 EST. Please see our terms for use of feeds.

The price of gold and other precious metals has been rallying sharply, helped by a falling dollar, worries about rising inflation and concerns over the health of the global financial system. So far this year, the yellow metal is up around 20%.

Gold mining shares have not fared as well. They have been held back by broad-based weakness in equity markets and the prospect that higher costs for energy and other commodities could cut into those companies' operating profits.

Since the value of the ratio of the Market Vectors Gold Miners ETF (AMEX: GDX) to the streetTRACKS Gold Shares ETF (AMEX: GLD) hit a peak on October 31st, the yellow metal has outpaced the basket of mining shares by almost 20 percentage points.

Continue reading Gold: play the shares, not the metal?

Gold: play the shares, not the metal? originally appeared on BloggingStocks on Tue, 18 Mar 2008 18:24:00 EST. Please see our terms for use of feeds.

Many people believe that the bursting of the housing bubble was a prelude to a far-reaching property bust, and that few segments of the market will ultimately be spared.

Indeed, reports indicate that the commercial property market, which held up relatively well amid the early decline in home prices, is now in trouble and seems headed for a potentially nasty spill.

Given that, I thought it might be useful to go back and look at the pattern of the S&P 500 Homebuilder's Index in the run-up to the July 2005 peak and beyond, and see how that pattern compares to the recent price action in the Dow Jones Equity REIT index, which is made up of publicly-traded real estate investment trusts.

Continue reading If REITs follow homebuilders, a technical rally may be on the cards

If REITs follow homebuilders, a technical rally may be on the cards originally appeared on BloggingStocks on Fri, 08 Feb 2008 17:34:00 EST. Please see our terms for use of feeds.

Mining stocks don't always march in lockstep with the price of gold. Among other things, the shares can be affected by money flowing into and out of the overall equity market, as well as changes in company or sector operating fundamentals and investor outlooks.

That said, the shares and the precious metal do tend to loosely track one another; historically, at least, the relationship between the two tends not to move too far out of line. When it happens, however, it can signal a short-term trading opportunity.

Over the past few weeks, mining shares have come under considerable pressure in relation to the metal. In fact, the ratio of the Philadelphia Stock Exchange Gold and Silver Index (XAU) to spot gold has fallen to a level that has, in recent years at least, been a staging point for a relative rebound in the shares.

While it is possible that continuing turbulence in equity markets could produce a different result this time around, the pattern of the past five years suggests it is a good time to go long the shares and sell (or sell-short) the metal.

One way to play it using exchange-traded funds: buy the Market Vectors Gold Miners ETF (AMEX: GDX) and sell the streetTRACKS Gold Trust ETF (AMEX: GLD).

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

Mining shares: Back in the buy zone relative to gold originally appeared on BloggingStocks on Thu, 07 Feb 2008 13:15:00 EST. Please see our terms for use of feeds.

Although they've given back a bit of ground lately, commodity prices have performed well during the past year. Since last February, the benchmark Reuters/Jefferies CRB Index has gained 21.8%, aided in particular by strength in agricultural, energy and precious metals-related products.

One group of commodities, base (or industrial) metals -- which includes aluminum, zinc and copper -- has not kept pace with the others, however. Over the past twelve months, the Deutsche Bank Liquid Commodity Index-Optimum Yield Industrial Metals Excess Return Index -- which has an exchange-traded fund, the PowerShares DB Base Metals Fund ETF (AMEX: DBB) -- has only risen 2.1%.

Continue reading Base metals: Ready to run

Base metals: Ready to run originally appeared on BloggingStocks on Mon, 04 Feb 2008 16:17:00 EST. Please see our terms for use of feeds.

Many financial stocks have been on a tear since the Federal Reserve's surprise 75-basis point inter-meeting rate cut on January 22. For example, the KBW Bank Index -- which has an equivalent exchange-traded fund, the KBW Bank ETF (AMEX: KBE) -- has rallied 16.1%, beating the S&P 500 index by more than 10 percentage points.

Yet not all financial sub-groups have kept pace with the banks. For instance, after performing well in relative terms during the fourth quarter, insurers have stalled, with the KBW Insurance Index -- which has an equivalent exchange-traded fund, the KBW Insurance ETF (AMEX: KIE) -- more-or-less tracking the move in the overall market in recent weeks.

Continue reading Insurers poised for a bounce relative to banks?

Insurers poised for a bounce relative to banks? originally appeared on BloggingStocks on Mon, 04 Feb 2008 14:35:00 EST. Please see our terms for use of feeds.

On October 31, the benchmark U.S. dollar-denominated MSCI All Country World Index closed at a record price of 427.63. It has since fallen to 366.21, a drop of 14.36%.

Yet not all world markets have fared equally poorly. Over the three-month span, there has been significant divergence between some of the best and worst performers, as the accompanying graph and table attest.

While it is hard to draw definitive conclusions, two things seem to stand out:

• Aside from Japan, which has been among the worst performing Asian markets for quite some time (and thus, has likely attracted considerable "bottom-fishing" inflows from value and contrarian-oriented investors in recent months), and Malaysia, which has remained a curious oasis of stability since global markets peaked, Asia-Pacific markets have not been been a popular investment destination lately. Perhaps we are witnessing the unwinding of ill-fated "decoupling" trades?

Continue reading Relative performance of selected global ETFs since markets peaked

Relative performance of selected global ETFs since markets peaked originally appeared on BloggingStocks on Thu, 31 Jan 2008 16:14:00 EST. Please see our terms for use of feeds.

In recent weeks, the Nasdaq-100 Index (NDX) has lost considerable ground on an absolute basis and relative to the S&P 500 index.

Interestingly, if you graph the relationship between the large cap, technology-heavy bellwether and the broad market index going back to 2002, the pattern of recent months looks vaguely familiar.

In fact, it seems to be a mirror image of the false breakdown that occurred in the summer of 2006. After that particular "head fake," the ratio staged a major upside reversal, and technology shares outpaced the S&P 500 index by a wide margin over the course of the following 12 months.

Continue reading Does another false breakout portend more technology weakness?

Does another false breakout portend more technology weakness? originally appeared on BloggingStocks on Fri, 25 Jan 2008 14:30:00 EST. Please see our terms for use of feeds.

There's lately been plenty of evidence that investors are growing more cautious. Among other things, they are increasingly favoring defensive groups such as consumer staples and health care.

Not surprisingly, drug stocks, in particular, have also been attracting their fair share of institutional fund flows, based on what the sector-relative chart is showing us.

After lagging the broad S&P 500 index throughout the entire bull run, the AMEX Pharmaceutical Index has found its technical footing and recently broke through a key 5-year downtrend.

To be sure, investors have been less-than-enthusastic towards the group because of shrinking new-product pipelines and fears of a political backlash over high drug prices. Still, you have to wonder whether most of the "bad news" has been priced in.

If so, the pharmaceutical sector might be one group worth keeping a bullish eye on.

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

Drug stocks stage major breakout originally appeared on BloggingStocks on Fri, 11 Jan 2008 12:07:00 EST. Please see our terms for use of feeds.

Recently, Merrill Lynch's chief North American economist David Rosenberg (and a few others) have taken the plunge saying that a recession is now underway in the United States. But that doesn't mean they were necessarily first to make the call.

If you look at how various sectors have performed since the S&P 500 index hit a closing peak of 1565.15 on October 9, it seems like investors, collectively speaking at least, were ahead of the forecasters.

From the point the market reversed and began the descent that has continued into 2008, some of the best performing groups have been those that are generally seen as "defensive," including utilities, consumer staples and health care.

Continue reading Investors: Running for recessionary cover since the peak

Investors: Running for recessionary cover since the peak originally appeared on BloggingStocks on Thu, 10 Jan 2008 15:13:00 EST. Please see our terms for use of feeds.

During the first two months of the year, small and mid-cap shares were the stars of the show, relative performance-wise.

But with each successive swoon in the broad market -- beginning in late-February, late-July, and mid-October, respectively -- the shares of the biggest companies seemed to gain ground at the expense of their lighter-weight counterparts.

By the end of the year, the smallest capitalized shares had borne the brunt of the selling pressure.

Continue reading Size mattered during 2007

Size mattered during 2007 originally appeared on BloggingStocks on Mon, 31 Dec 2007 13:45:00 EST. Please see our terms for use of feeds.

So far during 2007, Japan's broad-based Topix Index has lost 12.2%, while the benchmark Nikkei-225 Stock Average has given back 11.1%.

In U.S. dollar terms, the Topix is down 7.6%, the fifth worst performer out of 90 selected global indexes, according to Bloomberg data. The Nikkei is off 6.4%, placing it sixth from the bottom.

On that basis alone, it's probably worth having a look at Japan as a contrarian play for 2008, especially given how well other foreign markets have fared in recent times.

Continue reading Technicals suggest next best overseas bet could be ... Japan

Technicals suggest next best overseas bet could be ... Japan originally appeared on BloggingStocks on Fri, 28 Dec 2007 13:39:00 EST. Please see our terms for use of feeds.

So far this year, the Commodity Research Bureau Index is up 16.62%. Given all the headlines about high prices at the pump and near-$100 a barrel crude oil, some might naturally assume the best performer among the six sub-groups in the benchmark index is energy. That is incorrect.

In fact, the grain sector is the true king of commodities for 2007. This CRB sub-group, which includes wheat, corn, and soybean futures, has outpaced the broader measure of commodity futures prices by 34.61%, a relative gain around twice that of the energy complex.

Here is a breakdown of the performance (in percent) of the various sub-groups relative to the CRB (through yesterday):

Grains	34.61%
Energy	17.19%
Precious Metals	6.33%
Industrials	0.31%
Livestock	-15.24%
Softs	-18.52%

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

What is the best-performing commodity for 2007? originally appeared on BloggingStocks on Thu, 27 Dec 2007 16:16:00 EST. Please see our terms for use of feeds.

The good news is that results this week from several leading Wall Street firms, including Goldman Sachs Group Inc. (NYSE: GS) and Lehman Brothers Holdings Inc. (NYSE: LEH), were better than many had feared.

The bad news is that the continuing crisis in global credit markets and the long-running technical relationship between broker/dealer's shares and other financial stocks suggest the former may still have plenty of room left on the downside.

Since January, the AMEX Securities Broker/Dealer Index ("XBD") has dropped by 16.2%. However, that is more than five percentage points better than the benchmark S&P Financial Index, which has an equivalent exchange-traded fund, the Financial Select Sector SPDR Fund ETF (AMEX: XLF).

Continue reading Further downside ahead for Wall Street firms' shares

Further downside ahead for Wall Street firms' shares originally appeared on BloggingStocks on Thu, 20 Dec 2007 10:42:00 EST. Please see our terms for use of feeds.

Over the last six weeks, the Philadelphia Gold and Silver Index ("XAU") has lost an eye-popping 16.2% while spot gold has slipped by 2.7%.

The last time the XAU fared as poorly relative to the price of the yellow metal was in August, after which the shares staged a notable rebound.

Indeed, with the benchmark index of precious metals mining shares nearing short-term technical support, the stage seems set for a replay of that summer reversal of fortunes.

Depending on your risk profile, it could be a good time to buy mining shares -- or, perhaps, the Market Vectors Gold Miners ETF (AMEX: GDX) -- and sell (or sell short) the underlying metal -- or a substitute such as the streetTRACKS Gold Trust ETF (AMEX: GLD).

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

Gold mining shares looking for a rebound originally appeared on BloggingStocks on Wed, 19 Dec 2007 12:10:00 EST. Please see our terms for use of feeds.

After rising more or less in line with overall market volume for years, there has been a noticeable surge since the spring in the relative turnover of selected exchange-traded funds (ETFs).

For the SPDR Trust Series 1 ETF (AMEX: SPY), which tracks the S&P 500 index, the average daily volume (ADV) compared to New York Stock Exchange Composite ADV increased from 6.1% in April to 16.8% last month. For the PowerShares QQQ ETF (NASDAQ: QQQQ), which emulates the Nasdaq-100 index, the numbers went from 6.3% to 14.1%. For the iShares Russell 2000 Index Fund ETF (AMEX: IWM), which mirrors the small cap benchmark, relative turnover rose from 3.4% to 6.7%.

Although it's not clear whether the activity was related to hedging or outright position-taking -- or both -- the sharp increase in activity suggests that there has been an important change in the underlying dynamic of the U.S. equity market. If so, it raises some interesting questions.

Could this be a sign, for example, that the influence of hedge funds, proprietary trading desks, and other speculative operators is expanding dramatically? Are investors of all stripes becoming increasingly focused on ETFs as an investing vehicle? Does this emphasis on trading bundles of shares mean that more individual issues are "mispriced"?

Whatever the case, this is a trend worth paying attention to.

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

ETF volumes have really taken off originally appeared on BloggingStocks on Tue, 18 Dec 2007 10:10:00 EST. Please see our terms for use of feeds.

It's no secret that financial and consumer stocks have been slammed this year. Since January, the S&P financial sector has shed 21.3% while the S&P consumer discretionary sector has lost 14.2%. That compares to a 2.2% gain in the S&P 500 index.

While it is likely far too early to call for a bottom in either group, a quick read of the technical relationship between the two sectors going back several years suggests it might nonetheless be time to bet on banks, brokers, and other financials while wagering on further weakness in the shares of companies that are most exposed to a slowdown in personal spending.

Arguably, this particular pairs-trade probably jibes with how traders are positioned and the near-term fundamental outlook. Right now, many people are afraid of what bombshell might hit the financial sector next. Yet as far as the economy goes, the majority of central bankers, analysts, and various Polyannas still seem to be expecting -- hoping -- that any slowdown we see will be mild, at worst.

In sentiment terms, at least, that suggests the former group has a decent amount of bad news priced in. In contrast, shares in the latter group could be vulnerable to downside surprises, especially given that we are now in the midst of the crucial holiday selling season.

One way to play it (depending on risk): buy the Financial Select Sector SPDR Fund (AMEX: XLF) and sell (sell-short) the Consumer Discretionary Select Sector SPDR Fund ETF (AMEX: XLY).

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

The lesser-of-two-evils pairs trade? originally appeared on BloggingStocks on Mon, 17 Dec 2007 18:15:00 EST. Please see our terms for use of feeds.

On October 9, the S&P 500 index rose 12.57 points to close at a record high of 1565.15. The move was attributed to the release of minutes from the Federal Reserve's September 18 meeting that indicated the central bank wasn't seeing any broad-based weakness in the U.S. economy.

But based on the performance of the overall market and various sectors since then, it seems that investors didn't necessarily buy into what policymakers said.

Over the course of 10 weeks, the benchmark measure has fallen by 6.9%, hurt by growing turbulence in credit markets and heightened fears over the health of the consumer and the state of the economy.

At the same time, some of the best performing groups have been those that often hold their own when investors are worried about the future. From the early October market peak, both the consumer staples and the utility sectors have gained 3.9%.

The big losers over the span: financials and consumer discretionary shares, which have lost 18.6% and 12.6%, respectively.

While it is still possible that the Fed's relatively sanguine views about the economy could prove correct, recent developments serve as a useful reminder when it comes to gauging which way share prices are headed, don't believe everything you hear!

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

Don't believe everything you hear ... not even from the Fed originally appeared on BloggingStocks on Mon, 17 Dec 2007 13:35:00 EST. Please see our terms for use of feeds.