Flat as a Pancake

 | Jan 03, 2012 | 6:15 AM EST
  • Comment
  • Print Print
  • Print

So, the S&P 500 closed flat as a pancake in 2011, the year everyone became a "macro trader." Wasn't this the year, in fact, when many observers have pointed out that the market correlations were the highest they have ever been?

Will it surprise you, then, to know corn was up while soybeans were down in the commodities space? For all the hootin' and hollerin' over the precious metals, gold was still up nearly 10% on the year while silver was lower by about 10%. I can go on with these sorts of comparisons, but my point is this: It might have been a macro-trade environment, but you still had to pick the correct grain and the correct precious metal in order to have become a winner in 2011.

The last time the market was flat on the year, it was 1947. It is difficult to make a comparison here, of course, as it was a very different world back then. However, did you know there was a crash in 1946? The Dow was the dominant index at that point, so let me note that the crash in 1946 came in August, when the Dow lost near 20% that month. The index finally bottomed at 160 in early October. (Uh-oh -- maybe there is more correlation than we thought!) After that, though, it wasn't as if stocks were off to the races.

Longer-term, after that 1946 bottom, the Dow spent the next three years trading between 160 and 190. That might not seem like much to you, but it's about a 20% trading range. Still, it was not until the latter part of 1949 that the market finally left that range behind. My point here is that, if you believe a flat year will be followed by an outsized move up or down, a look at some history might change your opinion.

Statistically speaking, the market is short-term overbought. The flip side of that is stocks are not overbought on an intermediate-term basis.

Overbought/Oversold Oscillator -- NYSE

What I find fascinating at this juncture is sentiment. Considering that the market has gone nowhere since early November -- confirming my oft-repeated view that the market was likely to chop about for a while -- sentiment has begun to lean toward too many bulls, and not bears.

The Investors Intelligence readings now show a reading just over 50% bulls, which is the highest since July.

Sentiment -- Investors Intelligence

The Market Vane bulls show a similar reading of 54% bulls, also the highest reading since July. Yet when we look at the Market Vane statistics on a four-week moving average, we see it is still rising. Trouble tends to arrive when it rolls over. In other words, as long as folks keep getting more bullish than they were four weeks ago, the market might not behave so well, but it will tend not to want to collapse.

Keep in mind this is a weekly reading, so its timing is not meant to catch the exact top or bottom but, rather, something in the area. In the last four weeks this reading has been at 50% or higher, so the likelihood of a rollover is now rising.

Sentiment -- Market Vane

The market has been choppy for two months now, and I don't expect that to change in the next week or so. The intermediate-term indicators say there should be support if the market sells off due to the short-term overbought reading. For now not much has changed.


Overbought/Oversold Oscillator -- Nasdaq

Columnist Conversations

As far as TSLA is concerned, I still have a higher target above the market at the 409 area.  I stated in ...
The TLT setup discussed in my last commentary is a bust. Key support was violated and it violated the recent l...
BBY is getting smoked this mornings(weak forecast).  The stock is off 8% after opening the session with a...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.