SmarTrend Statistics for January 19, 2010

As we noted in this column last week, the number of Uptrends, as a percentage of total trends, neared peak levels consistent with short term tops. The notion being that with so many stocks already in an Uptrend and above support levels, there are fewer buyers willing to pay up and so sellers dominate the marketplace. This ultimately led to the profit taking which took place on Friday. With the market having recovered most of its Friday losses, the question now becomes, will buyers continue to bid up stocks above these resistance levels? This week will provide a lot of information toward the answer to that question with some key earnings reports due from the likes of Goldman Sachs, IBM and Google. There are 65 S&P 500 companies reporting this week, representing 20% of total S&P market capitalization. Of the 65 companies reporting, 27 are financial-related stocks, representing 55% of the financials index by market cap. If we see continued "sell the news" action, even if earnings are better-than-expected, we can expect a momentary pause in the market's trek toward Dow 11,000. A minor pullback can be healthy and not something to get overly concerned about. If, however, some of our other proprietary indicators suggest a deeper move lower has become probable, we will report it immediately in our Morning Call newsletter. Last week, the SmarTrend Ratio (# of Uptrend vs. all trends) ticked up to 80.0% from 78.4% the week before. We have not seen a level greater than 80% since the end of September. The percentage of profitable Uptrends also fell from a toppy 85.5% a week ago to 81.7% - a clear sign of profit taking. Similarly, weaker stocks (those in Downtrends) are now down an average of -5.4% vs. -1.7%. Keep checking the Morning Call for additional insight into these indicators as well as influential corporate and economic happenings. perf01191