Update on Health of Market
(I was not able to display the charts but I still wanted to share the information)
The chart of the S&P 500 Index below appears to be showing the Index near or bouncing off of the 50 Day Simple Moving Average. This is not unusual action. In a healthy market oftentimes prices will go below their 20 Day Exponential Average. If the markets continue past there, then the next stop is the 50 Day Simple Moving Average. That is where we are right now. What happens next? In a strong market, Financial Institutions, Banks and Mutual Funds will take advantage of the weakness and start buying more shares at reduced prices. Will this happen this time? This week will probably give us our answer. The next chart add a little more weight to the market correction.
The chart we just looked at is based on capital weighting. That means that a few stocks like Apple, Microsoft and Amazon carry more weight because of their size. Capital weighting an index skews the health of the real market. The next chart of the S&P 500 we will look at is the equal-weighted S&P 500 Index, RSP. RSP gives each company an equal vote. That makes it possible to see what the real market is saying. Instead of allowing a few companies to lead the index up,RSP lets us see when a majority of companies or stocks are selling within the index. As you can see when you look at the S&P Index on an equal-weighted basis, the Index has broken the 50 Day Simple Moving Average on above average volume. Expect a continued correction in this market
Aon Corp (AON) was one of the few stocks that was up on Friday on heavier volume. Earnings were released on Friday too, and they beat estimates. Thus the pop in the stock. The fundamentals are not that bad either. The stock traded out of a 3 month channel and has had good volume the last several days. With the market in correction mode I would not buy at the market on this one. I would probably be looking to get in around $212.79. The stop should be about 7% below the price you paid.
The chart of the S&P 500 Index below appears to be showing the Index near or bouncing off of the 50 Day Simple Moving Average. This is not unusual action. In a healthy market oftentimes prices will go below their 20 Day Exponential Average. If the markets continue past there, then the next stop is the 50 Day Simple Moving Average. That is where we are right now. What happens next? In a strong market, Financial Institutions, Banks and Mutual Funds will take advantage of the weakness and start buying more shares at reduced prices. Will this happen this time? This week will probably give us our answer. The next chart add a little more weight to the market correction.
The chart we just looked at is based on capital weighting. That means that a few stocks like Apple, Microsoft and Amazon carry more weight because of their size. Capital weighting an index skews the health of the real market. The next chart of the S&P 500 we will look at is the equal-weighted S&P 500 Index, RSP. RSP gives each company an equal vote. That makes it possible to see what the real market is saying. Instead of allowing a few companies to lead the index up,RSP lets us see when a majority of companies or stocks are selling within the index. As you can see when you look at the S&P Index on an equal-weighted basis, the Index has broken the 50 Day Simple Moving Average on above average volume. Expect a continued correction in this market
Aon Corp (AON) was one of the few stocks that was up on Friday on heavier volume. Earnings were released on Friday too, and they beat estimates. Thus the pop in the stock. The fundamentals are not that bad either. The stock traded out of a 3 month channel and has had good volume the last several days. With the market in correction mode I would not buy at the market on this one. I would probably be looking to get in around $212.79. The stop should be about 7% below the price you paid.
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