I was recently interviewed by kate Statler on MoneyShow.com
Technical indicators are showing fledgling signs of a market turn, says advisor Andrew Horowitz, which makes him cautiously optimistic. He shares four names that he sees as flashing some signals of strength.
Kate Stalter: Today, I’m on the phone with Andrew Horowitz of advisory firm Horowitz & Company. Andrew is also host of the very popular podcast, The Disciplined Investor, which I have gotten a lot from, and I personally recommend that our listeners subscribe to that on iTunes.
Andrew, you recently sent out an e-mail to your list, and you were discussing something called the Spearman Indicator, which I found pretty interesting. Can you tell us a little bit about that?
Andrew Horowitz: Yeah, there are so many indicators out there to look at. There’s MACD, there’s various oscillators, there’s trending, but the Spearman Indicator is something that has been pretty interesting over the last, I think, one year or so, two years, because we’re in a little bit of a different market where things happen very quickly.
We see a movement to panic and then to absolute “thrilled with the markets” on a dime. We just see this spinning. So, the Spearman Indicator is a process, is an oscillator, and not to get too embroiled in all the details, but basically it looks for overbought and oversold conditions, let’s say in a market, the S&P 500.
- Also read: 7 Stocks with Fundamental Potential
What I have found by looking back over history with it, when we get to an extreme position in the Spearman Indicator, there usually is the potential for a very quick turn in this market condition. You have to get somewhat into the oversold or the overbought range of this indicator and then see a turn. You have to see the turn first.
That happened, I guess, about a week ago. Or I should say it happened a week ago, and then it happened before that, three weeks before that, and then it happened four weeks before that. It’s been very quickly getting from overbought to oversold.
So, when we look at this—when you look at what happened, let’s say, back in the middle part of December, I think was the best one—you saw this situation where all of a sudden oversold became a turning point, and the markets just rallied. So, that was a signal to consider not being short and possibly getting long the market.
Kate Stalter: One of the things that I noticed in your e-mail is that you did have a bit of a caveat that it was perhaps not the strongest buy signal? Is that still the case?
Andrew Horowitz: Yeah. What happened was: On that buy signal we didn’t see such an extreme oversold situation where you’d say, “Wow, this has just gotten so out of hand. You just want to go in and really buy, buy, buy, back up the truck.”
It was more of a turning point, but it was conditioned on the fact at that time that there was going to be possibly an uptrend, but be careful. It really hasn’t seen the shakeout that you’d want to see to get a real big uptrend that’s long lasting at that point.
Kate Stalter: Given all that then, Andrew, is there anything on your watch list that you’re taking a look at these days as a possible buy candidate?
Andrew Horowitz: Here’s one thing, Kate, that’s going on. You probably noticed this—I’m sure you have—that there’s been a rotation in the markets lately.