2. Cluster Statistics
3. High EPS Surprise % Stocks [HEPS]
4. Darkened selected area = area of high HEPS stocks
5. HEPS stocks do not have high 1-m forecast return%
6. HEPS stocks score do not have good long term performance track record
7. HEPS stocks are smaller market caps
8. HEPS stocks are lower priced
9. HEPS stocks fundamentals show low M/B Ratio
10. Lower P/E Ratio too
11. HEPS stocks have High Beta
12. HEPS stocks have good valuations
13. High Volatility too
14. But they are not the top in terms of daily average volume
Explanation page on methodology and terminolgy is at http://www.technifundamentals.com/2010/07/explanation-page.htmlMarket Outlook
The S&P500 fell by 4 % during the week from 1124 to 1080. The market was indecisive, buffeted between good news and bad news, suffering the half-empty, half-full glass syndrome. We can expect more of the same this week with a slight tilt towards Bearishness. Cluster S1 which approximates the S&P500 contains 78.10 % of the SOM's stock population and has a Beta of 1.13 which verifies that it is a good proxy of the S&P500 [since the Beta of the S&P500 is 1] The nodes on the SOM occupied by S&P500 components are labeled with "I". S2 which is 12.60 % of the stock population contains most of the L stocks. S3 with 9.3 % of the population contains most of the S stocks. The clusters are small, tight and well-defined which makes prediction more valid. Image 2 cluster statistics show S3 being more differentiated from the market than S2 [model variable bars are longer] and indicates Bearishness to be more pronounced. The Beta of S2 (L cluster) is 2.64 while the Beta of S3 (S cluster) is 1.53. This indicates that L stocks are more sensitive to changes in the general market than S stocks. So it may be safer to go Short than to go Long. The main theme driving the market continues to be EPS surprise. Therefore we will look at the EPS surprise stocks as selected by the SOM, and their characteristics. * High EPS surprise means historical high EPS surprise since by definition we cannot know the high EPS surprise beforehand. In image 4 we select with the cursor, the area on the SOM with nodes of high EPS surprise- and this is the darkened area. Therefore from images 5 to 14, the individual attribute windows of our stock population are shown, and self-explanatory comments given on the darkened area of high EPS surprise stocks.The stocks selected on our SOM darkened area are shown in image image 3. For this week, we are going to do something different: Since the market is out of whack and schizophrenic, and any semblance of equilibrium based on fundamentals is lacking for the short term, we will use technical analysis to have a look at the selected stocks. I have never been a great fan of technical analysis but with the proliferation of machine-controlled high frequency trading, it is now something not to be ignored. Also, TA is now much more sophisticated. With the influx of a new generation of practitioners, we now have comprehensive decision-making systems based on IF, THEN rules instead of stand-alone indicators. One example of this is the Rahul Mohinder Oscillator system which is available with the latest MetaStock. For an introduction to the RMO, go to http://www.forestbergen.com/download/Metastock/MasteringMetaStock10_CH6-RMO.pdf . We shall use the RMO to analyze some of the selected stocks from the different sectors : Expedia (EXPE) Dow Chemical (DOW), Textron (TXT), Tenet Health Care (THC), Sandisk (SNDK), and Dillards (DDS). This will be done in the next post, (above this post) as images are getting too many for this post.
The S&P500 fell by 4 % during the week from 1124 to 1080. The market was indecisive, buffeted between good news and bad news, suffering the half-empty, half-full glass syndrome. We can expect more of the same this week with a slight tilt towards Bearishness. Cluster S1 which approximates the S&P500 contains 78.10 % of the SOM's stock population and has a Beta of 1.13 which verifies that it is a good proxy of the S&P500 [since the Beta of the S&P500 is 1] The nodes on the SOM occupied by S&P500 components are labeled with "I". S2 which is 12.60 % of the stock population contains most of the L stocks. S3 with 9.3 % of the population contains most of the S stocks. The clusters are small, tight and well-defined which makes prediction more valid. Image 2 cluster statistics show S3 being more differentiated from the market than S2 [model variable bars are longer] and indicates Bearishness to be more pronounced. The Beta of S2 (L cluster) is 2.64 while the Beta of S3 (S cluster) is 1.53. This indicates that L stocks are more sensitive to changes in the general market than S stocks. So it may be safer to go Short than to go Long. The main theme driving the market continues to be EPS surprise. Therefore we will look at the EPS surprise stocks as selected by the SOM, and their characteristics. * High EPS surprise means historical high EPS surprise since by definition we cannot know the high EPS surprise beforehand. In image 4 we select with the cursor, the area on the SOM with nodes of high EPS surprise- and this is the darkened area. Therefore from images 5 to 14, the individual attribute windows of our stock population are shown, and self-explanatory comments given on the darkened area of high EPS surprise stocks.The stocks selected on our SOM darkened area are shown in image image 3. For this week, we are going to do something different: Since the market is out of whack and schizophrenic, and any semblance of equilibrium based on fundamentals is lacking for the short term, we will use technical analysis to have a look at the selected stocks. I have never been a great fan of technical analysis but with the proliferation of machine-controlled high frequency trading, it is now something not to be ignored. Also, TA is now much more sophisticated. With the influx of a new generation of practitioners, we now have comprehensive decision-making systems based on IF, THEN rules instead of stand-alone indicators. One example of this is the Rahul Mohinder Oscillator system which is available with the latest MetaStock. For an introduction to the RMO, go to http://www.forestbergen.com/download/Metastock/MasteringMetaStock10_CH6-RMO.pdf . We shall use the RMO to analyze some of the selected stocks from the different sectors : Expedia (EXPE) Dow Chemical (DOW), Textron (TXT), Tenet Health Care (THC), Sandisk (SNDK), and Dillards (DDS). This will be done in the next post, (above this post) as images are getting too many for this post.
