::: Today’s Market Action :::
For the second straight day, the Nasdaq took the brunt of the selling and led the market lower. It gets worse. In terms of price and volume action combined, today marked the worst performance of the Nasdaq since June 13th when the market was in the the throes of a steep correction. I mentioned yesterday that one day of distribution won’t derail a market rally, but two consecutive days of high volume selling is certainly cause for concern. Was the recent break out from consolidation in the Nasdaq just a head fake move to bring in some last minute money? It’s a bit too soon to tell because the Nasdaq still has support of its 50 day moving average and the S&P and Dow still look darn good. However, you can’t ignore the fact that the semis got hammered today and appear to be headed much lower. In addition leading stocks, as evidenced by the beating the Self Investors Leading Index took today, took it on the chin. Tomorrow will be a very important day as the Nasdaq will test support of that 50 day around 2425. I personally believe that downside momentum is just too strong to hold there in the coming days and at some point it will retest the area around 2400. The bottom line is that the action of the past couple days is not healthy consolidation. I’ve been locking in some gains and cutting any losses quickly in my portfolio – you might want to do the same.
::: Major Indices Performance – The Numbers :::
(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day Jan 18th 2007
Nasdaq: DOWN 1.46% today with volume 13% ABOVE average
Nasdaq ETF (QQQQ) DOWN 1.85%, volume 73% ABOVE average
Dow: DOWN .07%, volume 4% ABOVE the average
Dow ETF (DIA): DOWN .19%, volume 37% ABOVE the average
S&P ETF (SPY): DOWN .34%, volume 1% ABOVE the average
Russell Small Cap ETF (IWM): DOWN .83%, volume 20% ABOVE the average
::: SelflInvestors Leading Stocks :::
The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base. Leading stocks held up yesterday, but got pummeled today, confirming market weakness.
Summary:
* Decliners led Advancers 352 to 72.
* Advancers were up an average of 1.20% today, with volume 31% ABOVE average
* Decliners were down an average of 2.22% with volume 21% ABOVE average
* The total SI Leading Stocks Index was DOWN 1.64% today with volume 23% ABOVE the average
::: Where’s the Money Flowing :::
Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading. The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s. A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing). Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash. For a detailed look at how I go about gauging sector/industry strength please see the following post: http://investing.typepad.com/tradingstocks/2006/09/wheres_the_big_.html
* Current Leading Sectors/Industries (over last 30 trading days):
Brokers/Dealers, Retail, Biotech, Health Care, Industrial
[not surprising that Tech and Semis have dropped off the leaders list today; industrials make their first appearance]
* Current Lagging Sectors/Industries (over last 30 trading days):
Natural Resources, Energy, Oil, Oil Services, Commodities
* Today’s Market Moving Industries/Sectors (UP):
Pharma, Retail and Global Healthcare all did very well today
* Today’s Market Moving Industries/Sectors (DOWN):
Semis, Nanotech, Internet Infrastructure, Networking and Clean Energy
::: Stocks :::
The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation. Today’s action didn’t provide any big movers out of bases or consolidation so I’ll go ahead and highlight what is currently the top rated stock in the SelfInvestors.com Breakout Watch list, SEI Investments (SEIC), which also happens to be a part of the hottest sector over the past 30 days (Broker/Dealers).
ABOUT: SEI Investments Company is a provider of asset management services and investment technology solutions. The Company’s solutions help corporations, financial institutions, financial advisors, and affluent families create and manage wealth. It operates through five segments: Private Banking and Trust, Investment Advisors, Enterprises, Money Managers and Investments in New Businesses. As of December 31, 2005, through its subsidiaries and partnerships in which the Company has interest, it administered $312.1 billion in mutual fund and pooled assets, managed $148.5 billion in assets, and operated from more than 20 offices in over a dozen countries.
FUNDAMENTALS: SEI Investments is a company that has exhibited tremendous consistency over the past several years with growth in the 20 -30% just about every year. Growth has ramped up a bit in recent quarters with accelerating quarter over quarter sales growth of 11%, 49%, 50% and 54% over the past year. While margins have dipped in the past year, they remain very strong (net margin is 21%). Return on Equity comes in at a whopping 46%. No wonder management owns a large, nearly 40% stake in the company and institutions continue to initiate new positions.
TECHNICAL: This isn’t just a company with outstanding fundamentals. With a recent break out above 60.60 from a beautiful looking base to a multi year high, SEIC looks poised for more provided the market doesn’t go into a sustained correction mode. It should be noted that the stock may face some resistance around 63, which is near the all time high of December 2000. Also of importance is the fact that many break outs fail in a correcting market – be careful out there.
SELFINVESTORS RATING: With a total score of 55/60 (28/30 for fundamentals, 27/30 for technical), SEIC is the highest rated stock in the Breakout Watch screen of the Self Investors Breakout Tracker.
Full Disclosure/Disclaimer: The stock of the day is by no means a buy recommendation. Please do your own research and make a personal decision based on your own tolerance for risk. I currently don’t hold a position in SEIC but am considering a position in the next several days.