Post by Conrad Alvin Lim on Mar 14, 2007 5:43:13 GMT -4
MARK HULBERT
Terrible Tuesdays
By Mark Hulbert, MarketWatch
Last Update: 5:24 PM ET Mar 13, 2007
ANNANDALE, Va. (MarketWatch) - What is it about Tuesdays?
It was on a Tuesday two weeks ago that stock market volatility returned with a vengeance, with the Dow Jones Industrial Average ($INDU : 12,075.96, -242.66, -2.0% ) dropping 416 points.
Two weeks to the day later, and the stock market got spooked again. The DJIA this time dropped 243 points, coming to a rest just 26 points above where it closed on March 5.
Should Tuesday's drop change your opinion about the stock market's prospects?
To find out, I consulted the same five newsletters I turned to two weeks ago. They are at the top of the ranking for risk-adjusted performance over the last ten years, a period that I believed was long enough to eliminate any advisers whose good performance is attributable to luck alone.
When I reviewed their market opinions immediately after the February 27 market drop of 416 points, all five were bullish.
It turns out that all five remain just as bullish today, Tuesday's big drop notwithstanding. What follows is a brief review of what each of the five thinks currently about the stock market's prospects.
In first place for risk-adjusted stock market timing performance over the last decade is Bob Brinker, editor of Bob Brinker's Marketimer. Though I had not yet received his March issue when I wrote my February 27 column, I predicted that he would not see the market's big drop on February 27 as reason to turn bearish.
I was right. In his March issue, which was received on March 5, Brinker wrote that "we would view a meaningful stock market correction favorably in terms of future market potential." Brinker went on to write that he does not believe that the correction experienced up until that point "has been sufficient to provide the type of health-restoring effect that is necessary in order to create a genuine buying opportunity."
To be sure, Brinker did not specifically update his advice following Tuesday's drop. But I'm confident he hasn't changed his mind, given that the DJIA is above the level at which it stood on March 5.
In second place for stock market timing advice over the last decade is Timer Digest. Editor Jim Schmidt bases this newsletter's market timing model on a consensus of the newsletters he calculates to be the top market timers. When I wrote about this newsletter two weeks ago, Schmidt's consensus of the top ten based on performance over the last 52 weeks was bullish, with 9 bulls and 1 bear. His consensus of the top ten for performance over the last two years is also bullish, with 8 bulls and 2 bears.
The situation has changed slightly since then, with the 52-week consensus slightly deteriorating and the two-year consensus slightly improving: The 52-week consensus now shows 7 bulls, 1 bear, and 2 neutral, while the two-year consensus shows 8 bulls, 1 neutral, and 1 bear. Schmidt continues to rate both indicators as "bullish."
In third place for stock market timing advice is Blue Chip Investor: Editor Steven Check updates hi valuation model just monthly, but at the end of February his model showed stocks to be significantly undervalued. In fact, his model showed stocks to be more undervalued today than on almost any other occasion since 1982, except for the period following the bottom of the 2000-2002 bear market.
In fourth and fifth place are two newsletter edited by Dan Sullivan: The Chartist and the Chartist Mutual Fund Letter. Prior to Tuesday's drop, Sullivan had said that a retest of the March 5 lows couldn't be ruled out, and advised clients not let the mere fact of such a retest cause them to sell their stocks.
The bottom line? All five at the top of the ranking for ten-year risk-adjusted stock market timing performance are bullish.
Does that mean we should, on contrarian grounds, be bearish? That is the question I received following my February 27th column, and no doubt many of you will be prompted by this column as well to ask the same question.
My answer is "no." To the extent contrarian analysis works, it is in being skeptical of the broad advisory consensus, not the average opinion of a subset of just five advisers with excellent long-term records. So a contrarian would be unable to draw any conclusion from the bullishness that prevails among these top five.
Contrarians would be able to draw a conclusion, however, from the consensus that prevails among all short-term market timers I track, as opposed to just the top five. And in this regard I should point out that this broader consensus has become significantly less bullish over the last couple of weeks - which, from a contrarian point of view, is an encouraging sign.
Consider the latest readings from the Hulbert Stock Newsletter Sentiment Index (HSNSI), which reflects the average recommended exposure to the stock market among a subset of short-term market timing newsletters tracked by the Hulbert Financial Digest. The HSNSI currently stands at 21.6%, down from 62.4% on February 26, the day before the DJIA dropped 416 points.
So while the top long-term performers have remained steadfastly bullish, the editor of the average stock market timing newsletter has retreated to cash in a big way.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
Terrible Tuesdays
By Mark Hulbert, MarketWatch
Last Update: 5:24 PM ET Mar 13, 2007
ANNANDALE, Va. (MarketWatch) - What is it about Tuesdays?
It was on a Tuesday two weeks ago that stock market volatility returned with a vengeance, with the Dow Jones Industrial Average ($INDU : 12,075.96, -242.66, -2.0% ) dropping 416 points.
Two weeks to the day later, and the stock market got spooked again. The DJIA this time dropped 243 points, coming to a rest just 26 points above where it closed on March 5.
Should Tuesday's drop change your opinion about the stock market's prospects?
To find out, I consulted the same five newsletters I turned to two weeks ago. They are at the top of the ranking for risk-adjusted performance over the last ten years, a period that I believed was long enough to eliminate any advisers whose good performance is attributable to luck alone.
When I reviewed their market opinions immediately after the February 27 market drop of 416 points, all five were bullish.
It turns out that all five remain just as bullish today, Tuesday's big drop notwithstanding. What follows is a brief review of what each of the five thinks currently about the stock market's prospects.
In first place for risk-adjusted stock market timing performance over the last decade is Bob Brinker, editor of Bob Brinker's Marketimer. Though I had not yet received his March issue when I wrote my February 27 column, I predicted that he would not see the market's big drop on February 27 as reason to turn bearish.
I was right. In his March issue, which was received on March 5, Brinker wrote that "we would view a meaningful stock market correction favorably in terms of future market potential." Brinker went on to write that he does not believe that the correction experienced up until that point "has been sufficient to provide the type of health-restoring effect that is necessary in order to create a genuine buying opportunity."
To be sure, Brinker did not specifically update his advice following Tuesday's drop. But I'm confident he hasn't changed his mind, given that the DJIA is above the level at which it stood on March 5.
In second place for stock market timing advice over the last decade is Timer Digest. Editor Jim Schmidt bases this newsletter's market timing model on a consensus of the newsletters he calculates to be the top market timers. When I wrote about this newsletter two weeks ago, Schmidt's consensus of the top ten based on performance over the last 52 weeks was bullish, with 9 bulls and 1 bear. His consensus of the top ten for performance over the last two years is also bullish, with 8 bulls and 2 bears.
The situation has changed slightly since then, with the 52-week consensus slightly deteriorating and the two-year consensus slightly improving: The 52-week consensus now shows 7 bulls, 1 bear, and 2 neutral, while the two-year consensus shows 8 bulls, 1 neutral, and 1 bear. Schmidt continues to rate both indicators as "bullish."
In third place for stock market timing advice is Blue Chip Investor: Editor Steven Check updates hi valuation model just monthly, but at the end of February his model showed stocks to be significantly undervalued. In fact, his model showed stocks to be more undervalued today than on almost any other occasion since 1982, except for the period following the bottom of the 2000-2002 bear market.
In fourth and fifth place are two newsletter edited by Dan Sullivan: The Chartist and the Chartist Mutual Fund Letter. Prior to Tuesday's drop, Sullivan had said that a retest of the March 5 lows couldn't be ruled out, and advised clients not let the mere fact of such a retest cause them to sell their stocks.
The bottom line? All five at the top of the ranking for ten-year risk-adjusted stock market timing performance are bullish.
Does that mean we should, on contrarian grounds, be bearish? That is the question I received following my February 27th column, and no doubt many of you will be prompted by this column as well to ask the same question.
My answer is "no." To the extent contrarian analysis works, it is in being skeptical of the broad advisory consensus, not the average opinion of a subset of just five advisers with excellent long-term records. So a contrarian would be unable to draw any conclusion from the bullishness that prevails among these top five.
Contrarians would be able to draw a conclusion, however, from the consensus that prevails among all short-term market timers I track, as opposed to just the top five. And in this regard I should point out that this broader consensus has become significantly less bullish over the last couple of weeks - which, from a contrarian point of view, is an encouraging sign.
Consider the latest readings from the Hulbert Stock Newsletter Sentiment Index (HSNSI), which reflects the average recommended exposure to the stock market among a subset of short-term market timing newsletters tracked by the Hulbert Financial Digest. The HSNSI currently stands at 21.6%, down from 62.4% on February 26, the day before the DJIA dropped 416 points.
So while the top long-term performers have remained steadfastly bullish, the editor of the average stock market timing newsletter has retreated to cash in a big way.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.