Four Indicators to Watch to Determine a Topping Bull Market

“Those four indicators are based on the performance of sectors that, prior to past market tops, either led or lagged the overall market. According to a study conducted by Ned Davis Research of returns over the last three months of each stock bull market in the U.S. since the early 1970s, two sectors stood out as usually leading the market: Consumer Discretionary and Consumer Staples.

Two other sectors, in contrast, typically lagged the market prior to those tops: Financials and Utilities.

The accompanying table, courtesy of FactSet, shows where we currently stand according to these four indicators.

A mixed picture, to be sure.

However, in my opinion, too much should not be made of the two sectors whose recent performance appear to be inconsistent with an imminent top.

Consider first the Consumer Staples sector, which has lagged the S&P 500 indexSPX +0.02%  over the last three months. This is a sector that, prior to past market tops, has usually led the market.

It turns out, however, that its market-lagging performance over the last three months can be traced to the final weeks of 2012. Might it be that this sector was artificially depressed by anxiety induced by the fiscal-cliff negotiations? This certainly seems plausible, since the consumer sentiment surveys covering the latter weeks of 2012 showed a marked pullback in consumer confidence….”

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“Great, Facebook launched something called Graph Search. But how does it actually help you? From content discovery to finding a restaurant, from recruiting to dating to a trip down memory lane, here’s what you can do with Graph Search. First, check out this quick hands-on video intro above. Then let’s look at some questions Google, Yelp, and LinkedIn couldn’t answer but Graph Search can.

First things first, go to facebook.com/graphsearch and click the button at the bottom to sign up for beta (or begin using it if you already have access). Starting today, Facebook is rolling Graph Search out slowly, but more people should get it in the coming weeks and months. Signing up means you’ll get it sooner.

When you do gain access, you’ll see a notice at the top of your Facebook homepage to activate Graph Search and take a quick tour. Then you’re free to start searching for things like:

DATING…”

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“Venture capital database CB Insights is releasing a new report today on the state of the VC industry and investments in 2012. For the year, $28.3 billion was invested by venture capital firms in 3,267 deals. However, it’s interesting to note that while seed VC funding hit highs during the year, overall investment fell from 2011’s $30+ billion level. And VC funding actually dipped for the second consecutive quarter in Q4 2012.

After Q3 2012’s deal activity levels (these were the highest since the dot-com days), Q4 stayed strong on a number of deals, which dipped slightly from 835 financings to 834 in the quarter. Funding in Q4 fell for the second straight quarter coming in at $6.8 billion. Funding slipped 7.5 percent from 2011 but still remained up 36 percent versus 2009.

Seed funding, which hit record levels in Q3 2012, still saw a strong quarter in Q4 2012, posting the second highest quarter for seed deals. It looks like the Series A crunch may not have taken full effect yet, as Series A deals saw the highest percentage of VC funding in the last five quarters.

New Enterprise Associates leads…”

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“The House of Representatives on Tuesday approved $50.5 billion in long-delayed federal disaster aid to victims of Superstorm Sandy, but not before Republicans flexed their budget-cutting muscle to strike some spending provisions.

The aid package for the storm that ravaged New York and New Jerseycoastlines now moves to the Democratic-controlled Senate, where it is expected to win swift passage.

The legislation had been tied up for weeks in the House amid congressional brawling over U.S. deficit reduction, spending and taxes in the New Year’s new fiscal drama.

And surprisingly stiff opposition from Republicans in the 241-180 vote foreshadows a tough road ahead for winning House approval of future budget deals over the debt limit and other looming fiscal deadlines…..”

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“This earnings season, the U.S. technology industry is in an unusual position – dragging corporate America down, rather than lifting it up.

Wall Street expects the tech sector’s fourth-quarter earnings to be down 1.1 percent from a year ago, the first drop since the third quarter of 2009, even though overallS&P 500 profits are still forecast to show growth, according to Thomson Reuters data.

Chip companies are expected to be among the worst performers because of softer-than-expected personal computer sales. Weak overseas demand and worries about the U.S. fiscal crisis have also likely caused corporations to put off IT spending.

“The lack of economic growth we’ve seen in Europe, the deceleration of emerging markets – that has put a significant amount of pressure, particularly on technology,” said Omar Aguilar, chief investment officer for equities at Charles Schwab Corp, in San Francisco.

Tech stocks have struggled recently and further weakness could dent the bullish 2013 forecasts many strategists have for the U.S. stock market. But some investors and analysts say weak fourth-quarter numbers have already been baked into many tech stock prices and valuations are attractive.

Analysts at Bank of America Merrill Lynch wrote in a note this week that tech stocks are undervalued by about 32 percent, more than any other sector, based on current forward price-to-earnings ratios. Every tech industry except IT services is trading well below historical levels, the note said…..”

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“Applications for U.S. home mortgages rose for a second straight week following three weeks of declines, data from an industry group showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, surged 15.2 percent in the week ended Jan 11.

The index of refinancing applications jumped 15.3 percent, while the seasonally adjusted purchase index increased 12.9 percent to the highest level since April 2011…..”

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“Talks to take Dell private are at an advanced stage with at least four major banks lined up to provide financing, two sources with knowledge of the matter told Reuters, propelling shares of the No. 3 computer maker 7 percent higher.

Buyout firm Silver Lake Partners, which is leading the deal, tapped Credit Suisse,Bank of America Merrill Lynch, Barclaysand RBC late last year to finance a potential deal, the sources said on condition of anonymity, because details have not been made public.

JPMorgan is advising Dell on a potential buyout of the $19 billion company, which would be one of the largest deals since the global recession. It will also allow Dell, which has been trying to become a one-stop shop for corporate technology needs as the PC market shrinks, to conduct that difficult makeover away from public scrutiny….”

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“SAN FRANCISCO (AP) — A new government survey suggests the number of people seeking emergency treatment after consumingenergy drinks has doubled nationwide during the past four years, the same period in which the supercharged drink industry has surged in popularity in convenience stores, bars and on college campuses.

From 2007 to 2011, the government estimates the number ofemergency room visits involving the neon-labeled beverages shot up from about 10,000 to more than 20,000. Most of those cases involved teens or young adults, according to a survey of the nation’s hospitals released late last week by the Substance Abuse and Mental Health Services Administration.

The report doesn’t specify which symptoms brought people to the emergency room but calls energy drink consumption a “rising public health problem” that can cause insomnia, nervousness, headache, fast heartbeat and seizures that are severe enough to require emergency care.

Several emergency physicians said they had seen a clear uptick in the number of patients suffering from irregular heartbeats, anxiety and heart attacks who said they had recently downed an energy drink.

More than half of the patients considered in the survey who wound up in the emergency room told doctors they had downed only energy drinks. In 2011, about 42 percent of the cases involved energy drinks in combination with alcohol or drugs, such as the stimulants Adderall or Ritalin.

“A lot of people don’t realize the strength of these things. I had someone come in recently who had drunk three energy drinks in an hour, which is the equivalent of 15 cups of coffee,” said Howard Mell, an emergency physician in the suburbs of Cleveland, who serves as a spokesman for the American College of Emergency Physicians. “Essentially he gave himself a stress test and thankfully he passed. But if he had a weak heart or suffered from coronary disease and didn’t know it, this could have precipitated very bad things.”

The findings came as concerns over energy drinks have intensified following reports last fall of 18 deaths possibly tied to the drinks — including a 14-year-old Maryland girl who died after drinking two large cans of Monster Energy drinks. Monster does not believe its products were responsible for the death….”

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“DUBLIN, Ohio (AP) — Wendy’s fiscal fourth-quarter earnings topped Wall Street’s view, even as a key indicator of sales at North American restaurants dipped slightly. The hamburger chain also maintained its fiscal 2013 adjusted earnings forecast above analysts’ estimates, and its stock rose more than 4 percent in premarket trading Wednesday.

Wendy’s net income jumped to $22.4 million, or 6 cents per share, for the three months ended Dec. 30. That’s up sharply from $4 million, or 1 cent per share, a year earlier.

The current quarter’s results included a tax benefit, lower interest expense and a sharp rise in investment income.

Removing impairment charges, facility relocation costs and other items, adjusted earnings were 8 cents per share.

Revenue increased 2 percent to $629.9 million from $615 million.

Analysts surveyed by FactSet expected adjusted earnings of 4 cents per share on revenue of $637 million….”

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“Last night on CNBC, widely-followed market timer Tom DeMark told hosts that the bottom was in for Apple stock, which has been subjected to a vicious selloff over the past several months.

DeMark uses a number of indicators for market timing, and he told CNBC they are all aligning strongly in Apple’s favor:

This is something akin to the low we had December 4 on the Shanghai Index, when we turned positive at the exact low.

This looks like a very strong rally of at least 22 percent. We wouldn’t be surprised tomorrow to see Apple gap up above $494 or $495, despite trading lower in the after-market today, and then just move forward right from there and be strong for the next couple of weeks and reach $600. We think the low is in…today or tomorrow.

DeMark told CNBC that his firm turned bearish on Apple right at the top, and the price action in the stock since then is more or less what they would have expected…”

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“…

Industrial production increased 0.3 percent in December after having risen 1.0 percent in November when production rebounded in the industries that had been negatively affected by Hurricane Sandy in late October. For the fourth quarter as a whole, total industrial production moved up at an annual rate of 1.0 percent.

Manufacturing output advanced 0.8 percent in December following a gain of 1.3 percent in November; production edged up at an annual rate of 0.2 percent in the fourth quarter. The output at mines rose 0.6 percent in December, and the output of utilities fell 4.8 percent as unseasonably warm weather held down the demand for heating. At 98.1 percent of its 2007 average, total industrial production in December was 2.2 percent above its year-earlier level. Capacity utilization for total industry moved up 0.1 percentage point to 78.8 percent, a rate 1.5 percentage points below its long-run (1972–2011) average….”

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BUD, AAPL, ARMH, ATML, BA, DELL, GOOG, K, SEE, SNCR, VOD, ATEC, ANAC,

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In Play ,

On the Wires 

“Chipotle Mexican Grill Inc. (CMG) fell as much as 11 percent in early trading after reporting preliminary fourth-quarter profit that trailed analysts’ estimates.

The shares dropped 9.5 percent to $269 at 8:09 a.m. in New York, after earlier falling to $263.26. Chipotle declined 12 percent last year, the fifth-worse performance in the Russell 3000 Restaurants Index.

Profit in the quarter ended Dec. 31 may be $1.92 to $1.97 a share, the Denver-based restaurant chain said yesterday in a statement. Analysts projected $2.09, the average of estimates compiled by Bloomberg.

Food costs rose faster than the company expected, signaling the need to raise prices, according to John Glass, an analyst at Morgan Stanley in Boston. The burrito seller is up against increasing competition from rivals including Yum! Brands Inc. (YUM)’s Taco Bell, which is selling a more premium line of food called Cantina Bell….”

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“JPMorgan (JPM) announced that earnings for the fourth-quarter were $1.39 cents per share, beating estimates of $1.19 per share. Revenue increased by 10.2% year over year to $23.65 billion, beating estimates of $24.21 billion.

Shares are higher in early trading….”

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“WASHINGTON (AP) — Lower gas costs offset more expensive food and higher rents to keep a measure of U.S. consumer prices flat last month.

The Labor Department said Wednesday that food prices increased 0.2 percent in December from November. Rents and airline fares also rose. Gasoline prices fell a seasonally adjusted 2.3 percent.

The flat reading of the December consumer price index ends a year when inflation slowed. Consumer prices rose only 1.7 percent in 2012, down from 3 percent in 2011. Food prices increased 1.8 percent, down from 4.7 percent in 2011. Energy prices rose slightly.

Excluding the volatile food and energy categories, core prices ticked up just 0.1 percent in December compared with November. And core prices rose only 1.9 percent in 2012. That’s below the Federal Reserve’s inflation target of 2 percent and it’s lower than 2011’s increase of 2.2 percent.

Mild inflation leaves consumers with more money to spend, which is good for the economy. Lower inflation also makes it easier for the Fed to continue with its efforts to accelerate the economy. If the Fed were worried that prices are rising too fast, it might have to raise interest rates.

With job gains and economic growth steady but modest, many businesses are reluctant to raise prices for fear of losing customers. That’s helped keep inflation tame. Workers also aren’t able to demand higher wages when growth is weak. That limits their ability to pay more.

Gas prices have fallen sharply in recent months after spiking this summer. Prices at the pump averaged $3.29 a gallon nationwide on Wednesday. That’s about the same as a month ago and well below summer prices that nearly touched $4 a gallon….”

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“(Reuters) – Goldman Sachs Group Inc said its fourth-quarter earnings nearly tripled, driven by big gains in stock and bond values, increased revenue from dealmaking and lower compensation expenses.

Goldman, the fifth-largest U.S. bank by assets, reported earnings of $2.8 billion, or $5.60 per share, up from $978 million, or $1.84 per share, in the same period a year ago.

Analysts mostly had been forecasting much lower figures. Following its early morning report on Wednesday, Goldman shares were up 1.8 percent at $138 in premarket trading.

A significant part of Goldman’s earnings boom came from improvements in market values in the stock and bond markets, as well as increased activity.

The New York-based investment bank said it took in “significantly higher” revenues from credit products and mortgages in its bond-trading business. Its investing and lending division, which mostly earns money from higher values on Goldman’s own stock and bond investments, reported nearly $2 billion worth of revenue….”

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“Bank of New York Mellon Corp., the world’s largest custody bank, said fourth-quarter earnings rose 23 percent as higher client assets boosted revenue.

Net income climbed to $622 million, or 53 cents per share, from $505 million, or 42 cents, a year earlier, the New York- based bank said today in a statement. Earnings a year earlier were reduced by expenses tied to job reductions. Analysts had expected BNY Mellon to report a profit of 54 cents a share, the average of 17 estimates in a Bloomberg survey…”

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“Oil traded near the lowest level in almost a week in New York after U.S. crude stockpiles increased and the World Bank cut its economic growth forecasts.

Futures were little changed after slipping the most in almost a month yesterday. U.S. crude supplies gained a second week and inventories rose to a record at Cushing, Oklahoma, the delivery point for West Texas Intermediate, data from the industry-funded American Petroleum Institute showed. An Energy Department report today may show stockpiles climbed by 2.2 million barrels, according to a Bloomberg News survey. OPEC reduced its output to the lowest level in 14 months, a monthly report from the producer group showed.

“Supply in the U.S. is increasingly comfortable as their domestic production of oil and gas burgeons,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London.

Crude for February delivery was at $93.34 a barrel, up 6 cents, in electronic trading on the New York Mercantile Exchange at 1:39 p.m. London time. The contract declined 0.9 percent to $93.28 yesterday, the biggest drop since Dec. 21 and the lowest close since Jan. 9.

Brent for February settlement, which expires today, was 11 cents higher at $110.41 a barrel on the London-based ICE Futures Europe exchange. The more active March contract rose 14 cents to $109.77. The front-month European benchmark contract was at a premium of $17.12 to WTI. It closed at $17.02 yesterday, the narrowest spread since Sept. 19.

Cushing Supplies…”

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