3 Charts Telling a Story About Today's Stock Market

Sometimes there are simply so many interesting tidbits that you can't sit down and write an epistle about them all.  So today, let's just take a look at a few very interesting charts, and the message that is unfolding will be pretty obvious.

First, let's look at the internal action of the US stock market.

Click on the image above to view a larger chart.

In the chart above, you can see how the "market" really made it's low on that August 9th plunge.  The plunge was actually a 4-day event as the hedge funds and flash traders all ran out the door at the same time.  That magnified the loss, and as the "boo birds" jumped up on their soap boxes, the public speculator and investor also followed along in the following weeks.  But internally, the market slowly but surely gained traction.

Next, lets look at the S&P Banking Index.  One of the biggest problems this economic recovery has had is due to the housing "depression" and the effect this has had on the banking stocks that were so heavily exposed to mortgages right at the top in 2007.  It is intriguing, however, to see the following chart.

Click on the image above to view a larger chart.

It is interesting (and hopeful) that the S&P Banking Index has not only rallied up through the resistance of the market action from several months ago, but that the relative strength shown at the bottom has turned up.  This is a much needed trend that will buoy consumer sentitment, unemployment, and the overall stock market.

Lastly, let's take a look at the recent action of PIV, the PowerShares S&P 500 High Quality Portfolio (formerly known as the PowerShares Value Line Timeliness Select Portfolio).  This, again, is pure anecdotal evidence, but I like the action.  As you are probably aware, the Value Line service built a great reputation in decades past with their stock ranking service.  This reputation fell on hard times in recent years, however, as their ranking from 1 (best) to 5 (worst) rarely was proving to produce good results.  In some ways, in my opinion, this was a symptom of several trends that failed to reward their earnings momentum philosophy.  That is a much deeper evaluation than I am qualified to make, but I like it when their "1's" are outperforming, since it is a measure of the stock market rewarding improving earnings momentum.

Click on the image above to view a larger chart.

You can see in the chart above that the relative strength line at the bottom (in red) is showing a very persistent upward move, and not only that, but PIV has just broken above a recent correction neckline, as well as starting to eat into that resistance of last year's prices.

I hope you've enjoyed these tidbits for today.  Thanks for reading.

Don Hays

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