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Wolf Market


By Brendan Coffey, Analyst and Editor of Cabot Green Investor
From Cabot Green Investor Update  8/26/10 

The type of market we’re experiencing now, in which trading is range-bound but still manages to whipsaw investors, was recently termed a “wolf” market--not strong or decisive enough to be a bear or bull, but dangerous nonetheless.

Recently, the wolf has turned and pushed shares back down, causing many of the indicators we watch to look more negative than they have in a while. In particular, Cabot’s Two Second Indicator, which follows the number of new 52-week lows on the NYSE, shows us that more than 40 stocks hit new 52-week lows in 10 of the last 11 sessions coming into today. As long as the readings stay below the 40-level, we consider selling pressure light no matter what the market does. The high Two Second Indicator is a warning sign, but it may very well be just another leg of the range-bound market, since the same pattern was seen in late June, after which we had a strong--if range-bound--rally.

The Green-Timer is also bearish, but like the broad market, not yet threatening to break out of the range it has traversed since early 2009.

Caution is therefore the watchword now, and we’ve shifted our lone Buy, Polypore, to a Hold rating this week.

In positive news, California today green-lighted its first solar thermal plant in over 20 years. Solar thermal is a system whereby solar arrays heat water, creating steam to move turbines. The approved project--a 250MW project by NextEra Energy (NEE)--is the first of what is expected to be a boom in solar projects capitalizing on California’s extensive desert lands.

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