EconomicGreenfield

Yesterday (January 4, 2012) The Wall Street Journal had an article titled “Street Wary on Its Random Walk.”  In this article, 2012 S&P500 price forecasts from 13 financial firms are displayed and discussed.

As seen in the subtitle, the strategists at the 13 firms expect, on average, for the S&P500 to end 2012 at 1334, a 6.1% gain.   The median price forecast is 1340.

The article also shows how each firm’s 2011 forecasts fared vs. the actual S&P500 close of 1257.6; all but one of the forecasts proved to be too high.

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1277.30 as this post is written

On June 29 I wrote a blog post titled “Financial Stocks – Notable Price Action.”

I continue to believe that the “price action” of various financial stocks is disconcerting.  I view the poor performance of these financial and brokerage stocks to be one indicator among (very) many that serves as a “red flag” as to the financial markets and economy as a whole.

Here is an updated chart to that shown in the June 29 post.  It shows the XLF (the financial ETF) on a daily basis since 2007.  As well, the S&P500 is plotted above it, with GS and JPM shown below it.  The blue line on each indicates the 200dma:

(click on chart image to enlarge)(chart courtesy of StockCharts.com; chart created by and annotated by author)

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1277.06 as this post is written

In the June 29 post (“Financial Stocks – Notable Price Action”) I wrote the following:

I think that the relatively poor “price action” of various financial stocks is notable.  It is one of many current indications that overall stock market health is not as strong as a casual glance at the major indices would indicate.

I continue to believe that the lagging / “sagging” price of various financial stocks is highly notable.  Here is another chart that I created a while ago that provides another view of the poor “price action” of the financial stocks vs. that of the entire stock market, as depicted by the S&P500:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart created by and annotated by author)

-

The above chart is depicted on a daily basis, LOG scale, since 2007.   On each of the three plots, a blue line depicts the 50dma for perspective.

As one can see, there has been an interesting progression of the relative price of the XLF (Financial SPDR) vs. the S&P500, as seen in the top of the chart.  In the middle of the chart, the same can be seen in the $XBD (Broker/Dealer Index).  Generally, since mid-2009, the price of both the XLF and $XBD have been on a slow downward trajectory relative to the price of the S&P500.  The S&P500 is plotted on the bottom of the chart.

In my experience, any time the financials lag the general stock market for a considerable period, it is generally a “red flag” that should be closely monitored.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1280.98 as this post is written