Monday, July 5, 2004

Statistic Sampling

Although both Fundamental and Technical Analysts rely on historical statistics (Those who ignore history ...) it is always wise to temper these with observation and caution. For example, on tonight's Nightly Business Report the well-respected Jeremy Seigel cited a survey on Election Year market performance the last few months leading up to the Election. Average % Up if a Republican wins: 4.8% since 1948, then another 4.2% in Nov.Dec. , much superior to Democratic victories; however, the following year reverses if a Democrat wins :6% vs. 9%.
When Drug companies seek FDA approval thousands of samplings are needed, as with political and economic surveys - how reliable is a handful of samplings? What is the likelihood of the market improving 4.8%this year? Very little! So we can use them as tentative guides, but warily.
Sentiment Indicators for the week: The ISE put/call ratio (I-SEE) approached a dangerous level of 210, a negative sign, as is the Mutual Fund cash dropping to 4.7% in the IBD survey. Also negative is the low Bearish outlook on both the Investor's Intelligence and AAII market surveys ( 17.4% and 15.7%-down from a mid-May 40-, respectively). Most other Indicators remain neutral for now.

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