Klein Market Summary-October 15th, 2012

Klein Market Summary

October 15th, 2012

Current Market Facts:

Technical Status Market in Correction Beginning Week 2
Other Observations A critical level of Distribution has put the market into a correction

Many liquid leaders have undercut their 10 week MA

Feel of the Market Leaders like AAPL and AMZN have signaled the decisions of Intelligent Institutions

Important Levels on Key Indices:

Index Support Last Close Resistance
Nasdaq 3040 3044 3100
Nasdaq 100 2700 2720 2800
S&P 500 1426 1428 1450
 DJIA 13289/13330 13328 13500

Important Levels on Key Indices: 

Market Interpretation:

The NASDAQ Composite has been overtaken by a substantial amount of Distribution in recent weeks.  This included 3 gaps down, and recently 6 consecutive down days with the index closing the week below its 50 Day MA.  The S&P 500 has fared quite a bit better, finding support at its 50 Day on Friday.  Also, NYSE volume has shown slightly less Distribution than NASDAQ.  Regardless of how you parse it, the indices have been under substantial pressure.  Leadership has also signaled weakness.

With many stocks basing, especially liquid ones like AAPL, the Defense must take the field.  Reduction of exposure is a key way to limit risk in correcting markets.  This could also be a rotation out of tech stocks and into retail, medical, housing and basic goods and services.  However, evidence still suggests that stocks are in a correction.

Joel’s Take:

Owning stock in this market is hard to justify.  If you are flat or underwater, stock should be sold.  If you have some stock that is showing a substantial gain, often it should be sold as well.

AAPL remains the most widely owned stock among leading institutions.  As such, it is perhaps the most important leading stock to watch.  However, it is late in its overall move that began in 2004.  Also, with the departure of Steve Jobs, and increasingly difficult comparisons, is AAPL losing its luster?  Its move in the recent minor uptrend was fairly weak.  It rose 13% from a pivot point in 8 weeks before stalling.

It is scheduled to announce a new iPad in 2 weeks, and is rumored to be working on a new approach to its Apple TV.  However, recent news items seem like AAPL is having trouble executing the way it has in prior years. For example, the new maps feature fell short of expectations and promises.  With a quarter of deceleration already on its books, AAPL should be watched closely.

A market correction here could signal a pause ahead of the election, or it could develop into a deeper, more protracted correction.  For now, it is not possible to know.  We must look at this start-and-stop market action as late stage Bull Market action for the uptrend that began in March of 2009.  Late stage markets often produce short uptrends that end in a matter of weeks.

  • The Klein Market Summary is a professional interpretation of the general stock market conditions that is updated on a weekly basis.  Joel T. Klein is the portfolio manager of the investment partnership Blue Diamond Capital, LP. He writes the summary using select technical and fundamental data.  The Klein Market Summary is not intended to provide investment advice of any kind, and is only provided for the entertainment of the reader.  It is typically updated Monday morning, weekly.  Please e-mail info@kleinasset.com, if you are interested in receiving this free weekly update.
  • Past performance is not a guarantee of future results.  Due to market volatility, a fund’s performance may fluctuate.  Current performance may be less than previous results.  An investment a hedge fund when redeemed, may be worth more or less than the original cost.  Information above is not a replacement for the Fund’s prospectus.  This webpage does not constitute any kind of offer or solicitation.  Additional information on investment objectives and policies is in the Fund’s prospectus.  Ask your representative for a prospectus.

About kleinmarketforum

Klein Asset Management, LLC, formed in 2003, serves individual investors via a directional growth stock approach. When the market is in an uptrend, the firm seeks to exploit investment opportunities. When the trend is down or neutral, assets are protected. Klein Asset Management undertakes major market research projects. In many cases, these result in improved investment methods, which ultimately improve performance.

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