Jul 2...Though the general market was flat, we saw nice separation between our best and worst performing groups...around 4%.

REIT's gained nearly 2%.  Banks were also strong.  Small caps and stocks with low institutional coverage also fared well.

On the losing side, semiconductors were weak yet again, down nearly 2%.  1 month and 3 month losers were also weak.

Given the absence of volatility data in today's tables, we'll refrain from a prediction for the next session.  On one hand, it follows a holiday (a positive sign), but on the other, today's continued weakness in semiconductors should be taken as a negative sign.

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We've crunched our data for the second half of June.  Our own non-weighted look at the bulk of the Russell 3000 index shows a gain of about 1.6% for the period.

Contrary to the results for June as a whole, high-volatility stocks fared well during this period, while low-volatility stocks were weak.  Stocks with nice yearlong gains were strong, in keeping with standard June seasonality.  Metals and mining stocks were strong, as well as scientific instruments.  Transportation-related stocks were strong after risk-adjustment.

On the losing side, large-cap stocks were weak.

Jul 1...The general market was down around 1.5% today.  The really noteworthy observation today is that semiconductors were slaughtered to the tune of better than 4% on negative news concerning Intel.  

Only one group out of around 1500 finished in positive territory...oils, with a gain around .15%.  REIT's, non-volatile stocks, and Tuesday's losers were relatively strong.

Other losers included volatile stocks, cheap stocks, and recent winners.

The above observations enhance the probability of tomorrow's session being negative as well.

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Our quarterly data is in.  According to our non-weighted selection of stocks, the second quarter was flat (up about .1%).

The best place to be:  oils, up around 9%.  Healthcare, metals and mining, and transportation-related stocks also fared well.  Interestingly, stocks that were weak in Q2 2003 fared well (and, conversely,  those that were strong in Q2 2003 were weak in Q2 2004).

On the losing side, semiconductors were down around 11%.  Volatile stocks, cheap stocks, and those with losses over the previous 1 to 3 months all lost better than 7%.  REIT's were weak, especially on a risk-adjusted basis.

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We've got our data for the month of June.  The average stock in our non-weighted universe of Russell 3000 stocks gained a bit over 3%.  The best performers fell into the "dowdy, staid, low-tech" categories...metals, mining, oils, and transportation-related industries were all up around 8%.  Conversely, semiconductors and biotech were weak, losing better than 2%.

In typical June fashion, long term gainers outperformed long term losers...stocks trading well over their most prominent resistance levels gained nearly 7%, while those trading well under these levels were essentially flat.  Small caps fared well.  Stocks with weak fundamentals were punished.

Jun 30...Today was the end of the month, end of the quarter, end of the first half of the year, and the day on which the Fed finally raised interest rates (.25%).  One might have expected some fireworks...instead, equities moved in lockstep, with a "separation" between our best and worst groups of around 1.65%...very low.

Oils gained better than 1.5%.  Cheaply priced stocks, 3 month and 1 month losers, and those with weak volume (!?) over the last 10 days also fared well.

On the losing side, nothing of much statistical significance emerged.  Stocks with low institutional ownership were weak.

The above trends don't offer many clues as to tomorrow's market.  Bottom-fishing is often featured in the opening days of a month, however.

We'll be summarizing the second quarter, June, and the second half of June shortly...

Jun 29...With the general market gaining around .5% today, the focus switched back to industry groups.  Here, any company that makes a widget...computer hardware, chips, scientific devices...gained upwards of 1.75%.  Meanwhile, REIT's and retail were weak...down around 1.6%.  Most likely, the groups are having somewhat different reactions to the anticipated interest rate hike.

We won't speculate on the direction of tomorrow's market.

Jun 28...Though the market was down a tad, stocks with a large high-close differential (based on last Friday's trading) still gained about 1.2%.  Friday's losers, recent losers, and small-caps also gained.  No industry groups were found on the winning side of our tables...short term bottom fishing was where the action was.

On the losing side were one month and recent winners, down as much as 2%.  Oils and semiconductors were weak.

Given the fact that volatility did not play a role in determining today's best and worst groups, we'll refrain from guessing the direction of tomorrow's market.

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Here's a link to a discussion on "Dow Theory".  Not that it's particularly worth reading.  I don't claim to have more than a tad of knowledge of "Dow Theory"...it seems the basic idea is that there's some relationship between the 30 Dow Industrial stocks and the Dow Transportation stocks that can predict the future of the market (with amazing accuracy, according to some).

I won't even bother dissecting the data and seeing for myself.  The reason is simply that I find it weird and counterintuitive that these two non-diverse indices, with components that change yearly, could have much to say about the future of the stock market.

Let's say I did bother and found that "Dow Theory" correctly predicted, say, 18 of the last 20 bull markets.  Would that convince me?

Well, it would get my attention.  But still, one must consider that the wetware (i.e. gray matter) that came up with that pattern might be extraordinarily powerful in its pattern-seeking talent.  That would seem to be a good thing...but not necessarily.  For example, if you created 100 million different rules, and found that one or two predicted 18 out of 20 bull markets, should you really be impressed?  No!

If you doubt the ability of the human mind to scan for anything near 100 million patterns, consider the fact that a chess grandmaster (Gary Kasparov) is still capable of competing with computers that can examine 100 million outcomes in a second!

My point:  there are plenty of approaches to market and stock prediction that at least make a bit of sense.  Given a choice, it's better to focus on them.

Jun 25...Though the general markets were mixed (Dow down, Nasdaq up), our own unweighted mix of Russell 3000 stocks showed decent positivity...up about .8%.  It was one of those uncommon sessions where volatile stocks gain nicely (computer hardware was up about 2.3%), while non-volatile stocks actually lost money, suggesting that investors are actually pulling money out of safe, dowdy stocks for higher-risk investments.  We'll see where this all leads, but it's safe to say that the market has taken on a new tone in the last few sessions.

Other gainers today include semiconductors, cheap stocks, and Wednesday's winners.  Losing groups were dominated by indicators correlated with low volatility, including high capitalization and high dividends.  Stocks with low insider holdings were weak.

The above would suggest a positive Monday session.

Jun 24...A rather flat market, though it's interesting to note which groups came to the fore in our winning and losing tables:  1 month losers and 1 month gainers, respectively.  It seems like the market has taken on a somewhat different complexion in just the last few days, though it's too early to get excited about it.

Other winning groups included a number of retails, stocks with high insider holdings, and recent losers. Losers included semiconductors and Tuesday's winners.

The above doesn't suggest a direction for tomorrow's market.  Risk-takers might wish to emphasize bottom-fishing over momentum.

Jun 23...A strongly positive session, with volatile stocks making the largest gains (about 3%), and non-volatiles lagging (up 0.2%).

Semiconductors fared well.  Cheaply priced stocks were strong...the first time in a while that group has reared its head in our winning tables.  Yearlong winners were strong, in accord with standard June seasonality, though better-than-average performance could also be had via 3-month losers.

Banking stocks were weak.

The above trends make it likely that tomorrow will see another positive session.

Jun 22...A positive day, with semiconductors and computer hardware stocks showing gains over 2%.  3 month losers, recent losers, and volatile stocks in general also fared well.

Losing stocks included retails, banks, transportation-related stocks, low-caps, and stocks with a low number of institutional holders.

The trends would suggest a positive Wednesday session.

Jun 21...REIT's were the star today, gaining over 1% on a day when the general indices showed slight losses.  Banks were also relatively strong.

Outside of industry groups, low cap stocks showed strength.  Losing groups included 1 and 3 month losers, and volatile stocks in general.  The trend toward losses in these mid-term losers has been manifesting for a couple weeks now.

We won't offer a market prediction for the next session.

Jun 18...Once again, the market was nearly flat.  

Metals and mining stocks were our strongest group today.  The other winning groups in our tables were not of particular interest (e.g. the stocks falling into the 30-40% decile of "marketcap" were the fourth best group of stocks).

On the losing side, low cap stocks were hurt to the tune of a 1.1% loss.  Stocks with recent and 1-month losses, and those with strong June volume (!) were also hurt.

Given the tedious nature of today's market, we'll refrain from a prediction for the next session.

Jun 17...Again, industries represented the day's best and worst groups.  Oils and construction services were up over 1%, with metals and mining and transportation related stocks following.  Losing industries included just about every variety of "hi-tech"...down around 2%, excluding biotech

Low caps outperformed.  Volatile stocks, and those with recent and three-month losses were weak. 

The above trends are somewhat bearish for tomorrow's session.

Jun 16...Industries dominated the action today.  By a wide margin, our best performing group was oils (up better than 2.3%), followed by biotechs (1.4%).  On the losing side were semiconductors (down .7%).

Other winners included stocks with nice recent gains, low-caps, losses this time last year, and volatile stocks.  Losers included stocks with weak volume, and those with recent losses.

The trends above are a mixed bag in terms of predicting tomorrow's market session...we'll refrain from doing that.

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We've got our data for the first half of Jun.  Essentially, the market was flat when looking at our unweighted sampling of Russell 3000 stocks.

Winners included raw materials, oils, and transportation-related stocks...all up about 2%.  Stocks that had fared well over the last three months were also included in the mix...standard June seasonality.  Stocks held by large numbers of institutions also made our winning tables.

Despite the general flatness in the market, the losing side was where the action seemed to be.  Here were both biotechs (-4%) and semiconductors (-6%), though the groups seemed to show a contrary relationship on a shorter-term (i.e. daily) basis.  Banks were quite weak on a risk-adjusted scale.  Three month losers, volatile stocks in general, and those with weak fundamentals (as measured by profit margin) were also included in the mix.

Jun 15...Nice positivity...volatile stocks were strong, non-volatiles weak.

Other positive groups included stocks with negative profit margins, last Thursday's gainers, stocks that were weak this time last year, semiconductors, oils, and yesterday's losers.

Weak groups include large caps, stocks with low institutional holdings relative to marketcap, and banking stocks.

The action today suggests more positivity tomorrow.  Of course, the action yesterday hardly predicted that of today...at best, we hope to be right around 65% of the time.

Jun 14...Strong negativity, with non-volatiles performing best.

One interesting reversal today...biotechs resisted losses (down less than .5%), while semiconductors and computer hardware got burned to the tune of  more than 3%.  For the zillionth time, we see give and take between these two groups.

Cheap stocks, low-caps, those with large losses over the last three months, and last Monday's winners all lost around 3%.

The above would tend to indicate another negative session.  One small positive:  the most volatile stocks weren't the biggest losers today.

Jun 10...The general indices scratched out gains, but the "tone" was somewhat bearish...the most volatile stocks were the biggest losers of the day.

The only winning group of note was the oil industry, gaining around 1%...other groups showed gains, but they weren't large enough to consider as trends worth noting.

On the losing side, we had biotechs, which were near the top of the losing column every day this week.  The group lost a bit over 1%.  3 month and yearlong losers were also weak today.

The above trends offer a suggestion that Monday's session could be weak.

Jun 9...Textbook negativity...volatile stocks were burned to the tune of 3% losses, while non-volatiles lost less than .5%.

Oils and a number of retails resisted losses.  On the negative side, where the action really was, we see biotechs losing 3%, yesterday's losers continuing to lose, and 3 month losers performing weakly as well.

Today's action signals continued weakness tomorrow.

Jun 8...Though the major indices squeaked out gains, there's a bearish aura to the results in our daily tables today...volatile stocks, hi-techs, and biotechs all found themselves amongst the biggest losers of the day (down around 1%).  Additionally, the separation between best and worst groups was only about 2%...a somewhat negative sign.

Stocks with low "momentum" continued to drop today.

On the positive side, transportation-related stocks gained around 1%.  Stocks with nice historical gains on this day fared well.

Today's session suggests a weak market tomorrow.

Jun 7...A strongly positive market.  Stocks with a large differential between Friday's high and close gained 3.5%.  Semiconductors, 3 month losers, last Wednesday's losers, and cheap stocks also performed well.

On the weak side, non-volatiles and large-dividend-payers gained less than 1%.  Biotechs, however, were the weakest group, with gains of about .3%.

The trends above signal a positive market tomorrow.

Jun 4...The general indices were up around 1%.  Separation between our best and worst groups was only about 2%, meaning that stocks moved in lockstep today.

The strongest group was semiconductors, with gains a bit over 2%.  Stocks with recent losses, especially yesterday, also gained nicely.

Oils were the worst performing group, just eking out a loss.  Recent gainers were weak.  Retails lagged.

The action today would tend to signal a positive Monday session.

Jun 3...Losses in the major indices were rather minimal, but our own non-weighted sampling of the market had it down about 1.5%.

The biggest losses were in volatile stocks...down as much as 3.5%.  Semiconductors were weak.  Yesterday's losers continued to lose, while 3 month losers were also weak.

Non-volatiles held ground...down less than .5%.  Expensive stocks were also relatively strong.

The above observations tip the scales in favor of another negative session tomorrow.

Jun 2...The strongest trend of the day was toward losses in semiconductors...down nearly 2% on a day that was generally flat for the major indices.

On the winning side, transportation related stocks fared well.  Yearlong losers gained, reversing yesterday's tendency toward gains in yearlong winners.  Stocks with recent losses fared well.  REIT's outperformed.

Other losers included any variety of winning stocks...over the last 5 days to one year.

Given the losses in semiconductors, we'd say there's a slight bias toward a negative market tomorrow.

Jun 1...The strongest gainers today were oils...up nearly 2% on a basically flat day for the general market.  In keeping with June seasonality, yearlong gainers fared nicely as well, up better than 1%.  Other strong groups were low-caps, Friday's losers, and 3 month gainers.  It'll be interesting to see whether the  trend toward gains amongst yearlong winners is maintained over the next few days and weeks.

Losing groups included Friday's winners and stocks with large dividends.

This session gives little with which to forecast the next session...so we won't.

May 29 (Sat)...We've got our full month data and second half data for May.  The month was up a tad over 1%, with the second half up 4.2%.

The best way to profit this month was to go with semiconductors, with a nice flourish in the final week.  They were up about 8.5%, with all those gains and then some occuring in the second half of the month.  Another strong group was stocks that had taken a beating over the last 5 days to 3 months...again, those gains happened in the second half of the month.

On the losing side were biotechs, stocks with heavy institutional ownership with respect to market cap, small caps in general, oils (surprisingly), and heavily shorted stocks. 

Given the strength in the second half of the month, we didn't identify any groups that actually lost money in this time period.  Weak second half groups included biotechs, oils, and raw materials refiners.

May 28...Ignoring the fact that the major indices finished flat, the market was still quite tedious today.  Separation between our best and worst groups was only about 2%, and no groups stood out in terms of gains or losses.

The strongest trend of the day was simply the tendency for volatile stocks to lose around 1%.  Small caps were weak.

On the positive side, stocks with little short interest outperformed, as well as those with recent losses.  Large caps were relatively strong.

Today's action offers a vague hint that next Tuesday could be a negative day.

May 27...Still more focus on stocks that have lost over the last month to three months...such stocks were up around 2% today.  With the exception of oil stocks, with losses over 1%, industry groups were not to be found in our tables.

Other winning groups include volatile stocks and those with recent losses (in the last five days).  Other losing groups include Monday's winners and stocks with big gains over the last three months.

Given the gains in volatile stocks, we'd say the odds favor more positivity in the next session.

May 26...A more sedate version of yesterday.  Stocks with losses over the last couple of months continued to make a comeback.  Biotechs were strong.  Interestingly, stocks with poor performances on this day last year fared well today...the statistical significance here indicates that this result is more than just a fluke.

Biotechs, REIT's, and tech stocks were strong.

On the losing side were small caps, oils, miscellaneous raw materials refiners, and stocks held by large numbers of institutions.

If anything, the data would point toward another positive session tomorrow.

May 25...The general market was up around 2% today.  The emphasis was on bottom fishing...stocks that had taken a licking over the last 1 to 3 months were up around 4% today.  Volatile stocks in general fared well, though it's interesting to note that tech stocks didn't break into our winning column today.

On the weak side, non-volatiles gained less than 1%.  Banks and stocks with big dividends were weak.

Today's action means there's a good chance that tomorrow will be a positive session as well.

May 24...Industries dominated our winning and losing tables today.  On the winning side, oils were up better than 3%, about 1.3% higher than the next closest group.  On the other hand, biotechs lost a tad on an otherwise positive day for the broad indices.

Other featured groups were tech stocks and volatile stocks in general, with gains over 1%, and non-volatiles and stocks with high dividends on the losing side, just squeaking out gains.

The action would tend to indicate a positive session tomorrow.

May 21...Somewhat "contradictory" signals today.  On one hand the market was [slightly] higher...a good sign.  On the other hand, the spread between our best and worse groups was small, indicating a tendency for stocks to march in lockstep...a bad sign, especially for short-term traders.  Still, we saw volatile stocks take the lead and non-volatiles lag...a good sign.

Finally, we saw a tendency toward bottom fishing, with three-month and recent losers gaining nicely.  Cheap stocks also fared well.  Let's call these "interesting" signs, given the fact that these indicators have not appeared in our winning columns with great frequency of late.

On the weak side, oils and utilities lagged.  Expensive stocks and Monday's winners were also weak.

We'd look for a positive Monday.

May 20...The general indices were flat.  Still, we got a higher-than normal spread between our best and worst groups (nearly 4%), which we take as a positive sign.

The best performing group, by far, was REIT's, gaining over 2%.  Banks were strong as well.

On the negative side, stocks with negative profit margins got burned.  Volatile stocks, cheap stocks (a continuing counter-seasonal theme), biotechs, and recent losers were hurt as well.

The trends would suggest a weak market tomorrow.

May 19...Despite the flat to negative tone in the general indices, hi-tech stocks found themselves at the top of our best performing groups list.  Given the gains in tech stocks, the 80-90% most volatile stocks were strong as well.  There was also some bottom-fishing, with 1-3 month losers faring well...this trend has been going on for several days now, reversing a longer-term emphasis on momentum.  

On the negative side, REIT's took a farely substantial hit...greater than 2% losses.  Biotechs were weak.  Stocks with big gains on Monday, low marketcap, or a high number of institutional holders lost as well.

Given the gains in techs and volatile issues, the outlook for tomorrow is vaguely positive.

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I spent an hour watching a TV show called "Riots" last night...video clips of mobs of people out of control...the Rodney King riots, UCLA students running amuck after an NCAA championship.  The capacity for large groups of people to act as a herd, losing all rationality, is truly amazing.  Don't assume such behavior can't or doesn't occur in the investment world.  

May 18...Nice positivity today, with the major indices up around 1%.  Still, volatility indicators were not prominent in our daily tables, leaving us answerless as to tomorrow's session.

The theme today was clearly bottom-fishing.  Stocks with recent and 1 month losses gained at least 2%.  Cheap stocks, metals and mining, and semiconductors were also strong.

On the negative side, oils were clearly the losers of the day...down over 1%.  Stocks with big gains over the month to 3 months were weak.

May 17...The only group (out of about 1500) that kept its head above water today was REIT's, gaining about .2%.  Oils held up well, but still lost money.

On the negative side, semiconductors and computer hardware, 3 month losers, yearlong winners, cheap stocks, volatile stocks, and last Wednesday's losers all lost at least 2%.

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Tinkering with the market data in our daily market summaries going back to July of 1993, we've formulated a few rules for predicting tomorrow's market...

• If the worst performing group in our "25-slice" daily tables loses less than .8%, tomorrow will likely be positive.

• If the last market session gained strongly (up 1% or more), the following day will likely be positive.

• If the market 3 or 4 sessions ago was particularly strong (up 1.8% or more), the next session will likely be strong.

• A strongly losing Friday or Monday is often followed by a weak Tuesday.

• If yesterday's market was weak (losing more than .5%) and the most recent session showed a large spread (5% or more) between the gains in our best and worst groups, tomorrow will likely be strong.

The differential between best and worst groups is an interesting indicator, we think.  It indicates whether stocks are rising and falling in lockstep, or if there are pockets of strength and weakness that seem to be disregarding the general market.

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We ran similar tests to what you see above, but this time we glommed all our half-monthly data tables into a single text file, and looked for trends with our software.  

Nothing of great significance emerged.  The general message seemed to be one of momentum, as opposed to bottom-fishing....if the previous half-month period gained, the odds increase (slightly) that the next half-month period will do the same.  In fact, the same logic applies when you look back two, as opposed to one, half-month periods...if stocks lost in the first half of month X, they tend to lose in the first half of month X+1.

Again, though, these results are not particularly significant...nothing breached p<.05.

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Finally, we ran tests that are similar to what you see above, but on full-month scales.  The problem here is, we've only got about 150 rows of data...one for each month since 1993.  It's a bit difficult to extract anything of significance from small sets of data like this, especially when you're dealing with something as chaotic as the stock market.

Again, the levels of significance were not particularly impressive, but the general themes were:

• a high "Group Stdev" (above 30) is a good thing in our "25 slice" tables.  Similarly, a large differential between high and low groups is a positive sign.

• months with particularly large losses in the weakest group (more than 13%) tend to be followed by gains, but be careful...months with more moderate losses in the weakest group tend to be followed by more weakness.

• months with large gains in the general market (more than 8%) tend to be followed by more gains.

Our own thinking on the logic behind the tendency toward future gains when the difference between high and low groups is large is this:  markets where stocks move in lockstep are driven by fear.  Nobody seems willing to go out on a limb and bid a particular group up.  You might also say that particular economic or politic themes...interest rates, inflation, oil supply, terrorism...play an excessive role in investment decisions in these environments.

On the other hand, whether the general market is gaining or losing, when various groups don't seem to be paying attention to the more general trends, optimism is reigning.

Currently, stocks are moving very much in lockstep...a negative sign.

May 15 (Sat)...We've got our data for the first half of May.  Our own non-weighted sampling of the market showed a loss of about 3%.

It was a difficult period to make a profit by going with a particular group of stocks.  Stocks with high profit margins, high market-cap, low volatility, or low short interest held up well, all losing less than 1%.  Oddly, semiconductors also resisted losses...a vaguely positive sign for the next few weeks.

On the negative side, cheap stocks lost around 7%, followed by any number of fundamentally unsound groups (e.g. a negative p/e ratio), small caps, heavily shorted stocks, volatile stocks, and those held by large numbers of institutions (relative to their capitalization).

May 14...REIT's, oils, and utilities were strong today.  Not surprisingly, stocks with high dividends were also included amongst our best gainers.

On the losing side, semiconductors lost around 2.5%.  Volatile stocks, 3 month losers, and cheap stocks in general were also weak.

The above trends suggest a weak Monday session...but a lot can happen over the weekend.

May 13...More trendless market action...the difference between our best and worst groups was about 2%.

Stocks with the high 60-80% of market capitalization fared well.  Stocks with a relatively low number of institutional holders outperformed, while those with large numbers of institutional holders suffered.  Yearlong gainers were relatively strong, as well as recent losers.

Retail was weak.  Small caps, cheap stocks, and yesterday's winners were also weak.

Again, the market leaves few clues as to tomorrow's direction.

May 12...Despite rather large trading ranges in the broad indices, the separation between our best and worst performing groups was rather sedate...a tad over 2%.

Biotechs and oils were relatively strong.  Losers included semiconductors, cheap stocks, recent winners, and longer term losers.

Today's market doesn't really offer many clues as to tomorrow's direction.  It's interesting to note that yesterday's market strongly suggested a positive market today...today's market lost 2% in the early going and scraped back to break-even levels.  Given the range of political/economic announcements that can manifest between close and open, we never really expect to be able to predict the next session with great accuracy.  Yesterday's market, however, might continue to give clues as to where the bias lies, say, an hour after the market open. 

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Having done a rough search for the conditions at market bottoms, what characterizes market tops?  We looked at the following tops:  7/15/98, 7/21/99, 8/22/00, 5/22/01, 3/15/02.  It's not that we couldn't have gone back further in time, but the bull run of the early-mid 90's formed surprisingly straight curves, with few pullbacks of note. 

The conditions at these tops didn't seem quite as uniform as those for the bottoms.  The most general theme seemed to be of volatile stocks declining WITH small caps resisting losses in the early stages of the decline.  So, there's something of a schism between these two groups, which normally have a positive relationship.

Looking at the chart of the S&P 500 over these years, market volume didn't seem to be much of an indicator that the market had "topped out".

May 11...strongly bullish conditions.  The best gaining groups, up nearly 4%, included volatile stocks, cheap stocks, yesterday's losers, and mid-term losers.  Semiconductors squeaked into our winning tables, but the tables were dominated by non-industry groups.

On the weak side, non-volatiles gained less than .3%.  Utilities and a number of raw material interests underperformed.

Today's activity means the chances for another positive session tomorrow are strong.  In fact, today's conditions are often seen at market bottoms (read below).

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We took a look at the "major bottoms" of the S&P 500 index over the last 10 years and identified the following:  7/18/96, 4/10/97, 12/31/97, 10/7/98, 10/18/99, 4/4/01, 10/8/02, and 3/10/03.  The market made a quick 10%+ move upward in all these cases.  Our main criteria for selection, though, was simply the way the chart looked.

The question we asked:  what were the market conditions just before and after these turnarounds?  We rustled through our daily and bi-weekly tables (available to you, should you care to repeat the exercise yourself for the sake of verification), and came up with the following observations:  

• these bottoms had a strong tendency to be preceded by markets in which volatile stocks and cheap stocks were on losing streaks.

• the bottoms were preceded by strong relative performance in mid-term and yearlong gainers

• the bottoms were followed by reversal of the above:  gains in cheap stocks, volatile stocks, semiconductors, and yearlong and recent losers.

• looking at the charts, it does appear that strong market volume is a characteristic of the early stages of these bull runs.  That is, you couldn't use market volume to predict the bottoms, but you might be able to use it to get in on the early part of the rise.

These observations are particularly scientific...we didn't run through our data for "false negatives"...cases where the above conditions were met, but a strong bull market didn't manifest.

It's interesting to note that 3 of these bottoms occured in October, though we don't want to read too much into this.

May 10...More negativity.  Our most positive groups still lost around 1%.  These groups included retails and large caps.  The big losers included oils, volatile stocks in general, cheap stocks, those with yearlong gains, and those with a price well below the 20 day average.

May 7...A strongly negative day...looking at about 1500 groups of stocks, we couldn't find one that lost less than .5%.  Nevertheless, there was an unusual twist...the strongest stocks were [volatile] tech stocks.

Other groups that held up well included non-volatiles and large-cap stocks.

The most negative stocks included metals and mining, and REIT's (down about 3.5%).  Another inversion of normal market logic was the fact that stocks of low PE ratios got burned in a big way, to the tune of more than 3%.

Given the strange atmosphere today, we can't offer an opinion as to the direction of Monday's session.

May 6...Another day where the gap between best and worst groups is only about 2%.  This time, though, the market had a clearly negative tone.

Groups that held ground well included REITS, utilities, and non-volatile stocks in general.  Losers included volatile stocks, an assortment of retails, yesterday's winners, and 3 month losers.

Given the losses in volatile stocks, the tone for tomorrow is negative.

May 5...We saw quite a small gap between our best and worst groups today...about 2%.  It seems that stocks were moving in lockstep.  Strong groups included biotechs, banking stocks, yearlong winners, and recent losers.  Weak groups included oils, small caps, cheap stocks, and stocks held by a large number of different institutions.

May 4...The market responded positively to the Fed's tempered remarks on future rate increases, and as a result, a number of recent trends reversed.  Semiconductors were strong, up nearly 3%.  Stocks with large 1 month and 3 month losses fared well.

On the negative side, biotechs (down 1%) and banks were weak.  Expensive stocks lost.

Interestingly, our "Shorts" indicator made a rare appearance on both sides of our tables today...lightly shorted stocks gained, heavily shorted stocks lost.

Volatility didn't play a major role in our tables, so we'll refrain from guessing on tomorrow's market.

May 3...Oils were the strongest performers today, with gains better than 2%.  Stocks with recent losses were strong.  Stocks with nice 3 month or yearlong gains were strong. Volatile stocks in general outperformed.

On the losing side, cheap stocks were weak.  Small caps in general were weak.  Those with big gains just recently, or big losses over the last year, lost.

The last few weeks have not been kind to small caps and cheap stocks...one wonders if we're seeing a short term trend that's likely to reverse, or a longer term trend that's just getting rolling.

Apr 30...Still more textbook negativity...volatiles got burned, non-volatiles held up OK.  Until we get a break in this pattern, one has got to figure the upcoming market session will also be negative.  Again, that's tempered by the fact that the next session is a new month...the "end of the month" consideration definitely didn't aid today's session, however.

Oils, banks, and some raw-material processers walked away with minimal losses.  On the negative side, semiconductors got burned yet again.  3 month losers, stocks with a series of recent losses, and fundamentally unsound stocks were also hurt.

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We've got our full month and second half data for April.  It's not pretty.

Our own unweighted sampling of the market showed about 4% loss for the month, with virtually all those losses occuring in the second half of the month.  Only a handful of groups showed gains...oils (3%), healthcare, biotech, and medical devices.  Expensive stocks held up relatively well, with losses around 1%.

The negative side was where the action was.  Semiconductors lost about 15%, and REIT's weren't far behind.  The losses in REIT's were particularly eye-catching given the fact that this group is normally not particularly volatile at all.  Other losers included volatile stocks in general, those that came into the month with large yearlong (12 month) gains, and those with weak first quarter performances.

Virtually all the REIT losses were in the first half of the month.  Likewise, the semiconductor losses were in the second half.

With the exception of the strength in the oils, the above behavior is certainly not typical April activity.

As for the second half, we've already mentioned the losses in semiconductors...about 12% in this 10 day span.  Other weak groups included volatile stocks in general, and stocks that had recent losses (over one, two, or three days) going into the middle of April.  Cheap stocks were weak.

About the only place a second half profit could have been had was biotech.  Even then, the gain was negligible (about .2%), and was helped by a monster gain in a particular biotech (OSIP).  Banks held up OK, taking a loss of around 1.5%.

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If you're a fan of the strategy of matching last month's April to historic Aprils, with the intention of getting a clue where May is headed, our own feeling is that April of 2002 offers a decent match.  Unfortunately, this was a difficult month in which to make a $.

Apr 29...More textbook negativity, with volatiles performing poorly and non-volatiles holding up best.

Outside of volatility indicators, insurance and banking stocks were relatively strong.  On the losing side, computer hardware stocks lost as much as 4%.  Cheap stocks were weak.  3 month losers were weak.

The above trends tend to signal continued losses in the next session, though this is tempered by the fact that the next session will be the last of the month...historically, a strong day.

Apr 28...Textbook negativity...the strongest stocks were the least volatile (down less than .5%), and the weakest were the most volatile (down about 5%).  Such behavior tends to portend continued negativity in the next session.

Utilities held up reasonably well (down less than .5%).  On the negative side, cheap stocks and those with large yearlong gains were both down around 4%.  Fundamentally weak stocks also suffered.

Apr 27...Two industry groups were again atop our winning and losing columns.  On the winning side, oils were strong, up about 2%, with the next strongest group up a mere 1%.  On the losing side, semiconductors were weak, down better than 2%...a continuation of yesterday's losses.

Other winning groups included stocks of low marketcap, and those with large numbers of institutional holders.  Losers included stocks with big yearlong gains, losses yesterday, gains last Friday, and high volatility.

Biotechs, a strong group yesterday, were up in line with the market.

If we were to guess, we'd say there's a very slight bias toward a negative market tomorrow.

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As you may have noticed, we've been generating "seasonal charts" at a fairly rapid clip.  Given some media attention on Dupont (strong earnings a couple days ago), we thought we'd make some charts for this company.  Quite interesting...there's a strong tendency for gains in the first couple of weeks of the second month of a quarter.  It's quite pronounced...one of the stranger charts we've put together.

The data goes all the way back to 1962.  Looking at more recent data, the pattern holds up fairly well.  It's a fairly staid stock, however, so it's questionable whether our observations could be used to profit to any great degree.

Note also that a very large chunk of the company's historical gains occur in just a couple months of the year.  Take a look.

Apr 26...The big gainers and losers today definitely involved industry groups:  biotechs/medical device makers versus semiconductors.  The former group was up over 3%, the latter down better than 2%.

On the positive side, most other leading groups intersected with biotechs in one way or another.  On the negative side, Thursday's losers lost again.  Mid-term (1 to 3 month) losers were weak as well.  Stocks that performed weakly at this time one year ago were weak again.

Once again, volatility did not come into play as an important predictor of gains or losses, so we'll refrain from guessing on the direction of tomorrow's market.

Apr 23...No extraordinary trends manifested today.  Semiconductors outperformed.  Short term to mid-term losers were relatively strong.  On the negative side, REIT's lost better than 1%.  Yesterday's strong gainers lost ground as well.

Again, volatility didn't come into play in our tables, so we won't offer any guesses as to Monday's market.

Apr 22...The general indices were up nicely, though those gains didn't come in the usual places.  Metals and mining scored, gaining over 3%.  Transports and construction services gained.  Yesterday's big losers were strong.  Weak groups included hi-tech, yesterday's big gainers, and last Friday's losers.

Volatility didn't really come into play as a predictor of gains or losses today...we'll refrain from speculating on the nature of tomorrow's market.

Apr 21...The sort of market that bodes well for the next session, with volatiles performing well and non-volatiles weak.  Our single strongest group, however, was scientific instruments, up nearly 3%, followed by biotech.  Other strong groups were recent losers and stocks with negative profit margins.

On the negative side, metals, mining, oil, and banking stocks were weak.  

Apr 20...With Alan Greenspan's relatively moderate comments sending the market into a tailspin near the close, non-volatile stocks were strongest, and volatiles were weakest.  Other relatively strong groups included transportation-related stocks, and retails.  Particularly negative groups were REIT's and those with big gains yesterday. 

Apr 19...A moderately positive day for most stocks.  Strong groups included volatiles, hi-tech, Friday's losers, and recent losers in general.  Weak groups were regional banks and non-volatiles.  The action would suggest continued gains in the next session.

Apr 16...The interesting action today was in the loss column.  There, stocks that performed well on this day over the last three years lost today in a very significant way.  The group was down about 2.4% on a generally positive day.  We've seen this sort of behavior before, though it somewhat defies common sense to think that the movement of a stock 252 days ago would serve as a good predictor of today's action.

Also in the loss column were yesterday's losers, 3 month losers, volatile stocks, and techs.

On the positive side, transportation related stocks made a rare appearance on the top of our table...up nearly 2%.  Stocks with good mid-term gains fared well.  Large-caps and banks outperformed.

The losses in volatile stocks would tend to indicate a negative session on Monday.  We should point out, however, we've been wrong more often than not in the last couple weeks...the market has not been "stereotypical" during this period, and thus has been difficult to match to historic periods.

Apr 15...The general indices were mixed today, with the NASDAQ down about 1% but the Dow up fractionally.  That's because tech stocks lost 2-3% today.  On the other hand, oils and REIT's gained at least 2%.

Other losers included volatile stocks in general, those that have a history of gaining on this day over the last 3 years (probably no fluke, given the significance levels), and those with strong 1 month to 1 year gains.

Other winners included Monday's losers, as well as recent losers in general.

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Our data for the first half of April is in.  We've got the period down about 1%.  By far, the best place to be was oils, up over 4%.  Volatile stocks in general actually managed to squeak out gains.  Losers on the last day of March were also in the positive column.  Yearlong losers crossed into positivity as well.

On the losing side, the worst group, of course, was REIT's.  The group lost over 12%.  That's monstrous for this normally low-risk group.  It would be worse if the group hadn't made decent gains in the last couple days.  Banks and other stocks with large dividends also lost in a fairly significant way.

Looking forward, the next couple of weeks have been historically strong.  If historical patterns hold up, volatile stocks will make very nice gains.

Apr 14...The general indices were down just a tad.  For the last two weeks or so, our computer has had difficulty matching the daily market sessions to historical sessions, and today was no exception.  

Despite the negativity, biotechs and high-techs gained.  Volatile stocks in general outperformed.  Yesterday's emphasis on good fundamentals reversed, with gains in stocks with weak profit margins.  Yesterday's big losers gained.

On the negative side, regional banks were weak.  Despite gains in yesterday's big losers, stocks that have performed poorly over the last month or so were weak.

For the first time in quite a while, REIT's were not featured in our tables.

The gains in volatile issues gives a hint that tomorrow has a decent chance to be positive.

Apr 13...A strongly negative day.  We couldn't find a single group of stocks that finished positively...we look at about 1500 groups.  The best of the lot were stocks that trade well below their 20 day moving averages, followed by several other groups indicating strong recent losses.  REIT's held up relatively well.  Non-volatiles outperformed.

On the losing side, stocks with big yearlong gains lost over 3% today.  Fundamentally unsound companies, as measured by p/e ratios or profit margins, were weak.  Volatile stocks in general held up well.

The trend toward losses in volatile stocks suggests tomorrow could be another negative session.

Apr 12...When will the losses in REIT's cease?  Today, the group was down nearly 5% in a slightly positive market.  Our entire loss column was dominated by groups that intersect strongly with this industry group (e.g. stocks with low momentum, big losses 4 trading days ago, etc.).  It would appear that the REIT's with the biggest losses last week were the ones that suffered the most today.

On the positive side, oils were strong, up over 2%.  Stocks with nice gains in the last month or week fared well.  Stocks that prospered in this period last year also did well today.  Momentum conditions are definitely prevailing.

Oils have been a nice investment this year.  In addition to good percentage gains, they offset rising gas prices and can potentially react positively to negative political or economic news.  Historically, they perform well up to June.

No opinion on tomorrow's market...again, we're not getting many clues.  We do note that we're moving into a very positive seasonal period...the second half of April...so we'd make an educated guess that the market will continue to move upwards in the next few weeks.

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Here's a link:  http://www.sentimentrader.com/subscriber/seasonality.htm .  There's the usual stuff on seasonal investing broken down according to the best months and best days of the month, but there's also a look at performance around options expirations.  The market tends to lose on options expiration day, though there's no indication of the significance of this move

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A good article on the concept of risk:  http://www.edge.org/3rd_culture/taleb04/taleb_index.html .  It doesn't relate directly to the stock market, though the author is a trader.  Plenty of food for thought.

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We've been tinkering with making "seasonal charts" for various stocks and or indices.  We wrote a little program that looks at the percentage gains of equities over various historical periods, averages all the gains and losses, and outputs the data into a file.  We then use a standard stock charting program to plot the data.

The idea would be to use charts to look for tendencies for particular equities to gain or lose at particular times of year.  As we've said before, we don't make any assumptions that a strong historical performance during a particular period tends to play out in the future.  In fact, the opposite seems to be true over some periods (e.g. there seems to be a slight tendency for last February's gainers to lose in the following February).

To start with, we plotted Dow yearly, quarterly (interesting), and monthly data going back to 1931.  Take a look.  You can also see the seasonal behavior of the XCI (Computer) Index.

Apr 8...Oils led our list of winning groups, up about .7%.  Semiconductors followed closely.  Large-caps outperformed.  Yesterday's tendency toward losses in stocks with low institutional ownership reversed.

On the losing side, REIT's lost back yesterday's gains (and a tad more).  Biotechs were weak.

Once again, volatility indicators did not appear in our tables, so we won't offer any thoughts on the direction of the next session.

Apr 7...REIT's staged a bit of a comeback today, up nearly 2%.  They've still got 6-8 percentage points to go before they recover what they've lost in the last week.  

The gains in REIT's spilled into intersecting groups...other winning groups were those that had losses yesterday and Monday, those with low short-term moving averages, etc.

On the losing side, stocks held by relatively few institutions or insiders got hurt.  Stocks with high marketcap or high prices were burned.  Transportation-related issues reversed yesterday's gains.

No opinion on tomorrow's market...our tables don't offer any serious clues here.

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A simple question...if you throw a coin 15 times, and it comes up heads 9 times, do you conclude that the coin is loaded?  

No!  But this "no" doesn't seem to apply to market pundits.  I've seen a really ludicrous array of election-related market gobbledygook of late...8 out of 12 times an incumbent has been re-elected, this happened, and 2 out of the 3 times he didn't get re-elected, that happened.   I'll refrain from dishing out any links, though.

As long as we're griping, what's with the emphasis on up days versus down days.  For example, you might read that the year is up 80% of the time that January is up.  That's nice, but as investors, isn't the really important thing percentage gains?  What would you prefer...9 fractionally up months and one major loser, or 9 fractionally down months and one big winner?

Naturally, there's usually a nice correlation between up periods and percentage gains.  But the percentage gains are primary to investors, not the ups versus downs.

Apr 6...continued major losses (4% or more) in the REIT department.  You've got to pity the normally conservative investors who are seeing something like a 10% loss in the group over the last week.

The action in REIT's, of course, spilled into other intersecting groups...for example, stocks that lost big yesterday tended to lose again today.  Outside of this sort of activity, we also note that volatile stocks in general lost to the tune of around 2%.

On the positive side, retails were strong.  Transportation-related stocks also came up positive.  Expensive stocks fared well.  Subtracting out REIT's, recent losers tended to resist losses as well.

This market is a bit strange.  Our computer had difficulty matching this session to other historical sessions.  The presence of a high-volatility group in our list of losing groups gives a clue that the next market session could be negative as well, but it's really anybody's guess.

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What's truly extraordinary about the losses in REIT's is the fact that the media doesn't seem to be picking up on it at all.  The normally non-volatile group has lost nearly 10% in the last week, but there's no mention of this on the popular financial sites.  Instead, we learn that IBM dropped $.48 from a $98.00 share price.

Apr 5...more excitement.  The average investor gained upwards of 1% today, but woe to those who are heavily into REIT's.  The group lost about 3.5% today.  Undoubtedly the decline relates to interest rate fears, but the relevant data was available early last Friday.  I didn't think such herd behavior could manifest in a group like REIT's.

Banks, high profit margin stocks, and Friday's losers also were burned.  Non-volatile stocks in general were hurt, though the group actually gained about .3% if REIT's are subtracted out.

On the positive side, last Wednesday's losers were strong.  Biotechs showed the first signs of life for a while.  Volatile stocks were strong.  Stocks with negative profit margins gained.

Given the volatility trends, one would have to cautiously predict yet another up session tomorrow.  "Cautiously", because there were several groups that outperformed volatile stocks on the long side, and non-volatiles on the short side. 

Apr 2...a very interesting trend developed today...stocks with low (negative) profit margins prospered in a very significant way, while stocks with high profit margins actually lost money on a day where the general indices were quite positive.  The former group was up as much as 4.5%, while the latter lost nearly 1%.  Quite a spread.

We'd assume it all relates to today's positive jobs report, though we couldn't say how.

Similarly, volatile stocks gained nicely (up nearly 4%), while non-volatile stocks actually lost around .5%.  It would seem that staid investors are getting a bit more adventuresome, moving out of fundamentally-sound, non-volatile stocks.  There's a speculative aura around the market.  The last time we saw this sort of behavior, back in late January, the market reversed pretty strongly.

Nevertheless, one would have to predict another positive market on Monday, given the gains in volatile stocks.

Other strong groups included stocks with low PE ratios and high yearlong gains.  Losers included stocks with big dividends, banking, and REIT's.

Apr 1...The general indices were up around 1%, but nothing of special significance emerged in our tables of winning groups.  Winners included semiconductors, monthlong losers, yesterday's losers, and stocks with low institutional ownership.  

Losers were more "pronounced", with oils by far the worst group... losses of around 1.3%.  Yesterday's big gainers lost a tad.

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