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On an equal weighted basis, the 50 most heavily traded tech stocks are 7.38% below their 1-year trailing high, although they are up on average 21.38% over 1 year.  They are up on average 5.40% over the last 10 days.  The price changes are not much different with or without Apple, but the top 50 less Apple is only 6.74% below its trailing 1-year high.

When all 212 of the US Tech Sector stocks are considered on an equal weighted basis, they are 10.68% below their trailing 1-year high, but up 18.90% for 252 days, up 5.51% for 63 days, up 6.16% for 21 days, and up 6.08% for 10 days.

This compares to the S&P 500 on an equal weight basis, which is up 27.80% over 1 year and only 3.79% below the equal weight 1-year trailing high.

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All have prices at or above their 200-day moving average, except for CAT which is 1% below the average.  All except MSFT, INTC and OXY have positive 252-day linear regression slopes.  All except INTC show the last 10 days of the 200-day moving average to be tilted upward.  All but INTC, CAT,and YUM have positive 252-day price changes.  All but T, TGT, WMB, and DUK are up over the last 10 days.  Those at least 5% below their 252-day trailing high price are: CAT, INTC, FDX, YUM, IBM, and DE.

Here is how the price behavior of those 20 ETFs look.

It was the largest bond offering in history.

The current blended rate for their debt is 181 basis points, and consists of these floating rate and fixed rate tranches:

Different investors will come to different conclusions about which stocks are attractive and which are unattractive. At a minimum momentum oriented investors will find those stocks that have not moved much or that are well below their highs to be unattractive. Conversely, value investors may be attracted to some stocks that momentum investors would shun.

Here is what we required of companies:

• S&P earnings and dividend quality A+, A, A- or B+
• dividend yield >= 2.03 (the SPY yield)
• 5-yr dividend growth rate >= 0
• dividend paid and increased each year for at least 5 years

There were 164 companies that passed that test.

We then estimated a plausible year ahead total return by calculating the percentage price change required to reach the consensus year ahead average target price, and adding to that the current yield. No growth in the dividend was assumed in that summation.

Based on that calculation, the 25 stocks with the highest year ahead total return expectation are as follows (listed from highest to lowest):

This is a view of those 25 stocks showing their quality ratings, current yield, 5-year dividend growth rate, the percentage price change to reach the target price, the expected total return, and also the percentage distance of the current (2013-04-19) price from the trailing intra-day highs for 3 months, 1 year, 3 years, and 5 years:

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The full spreadsheet of the information for the 164 names that passed the filters is available at this link to those who join our opt-in email list to receive occasional commentaries.

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Mutual funds are probably overwhelmingly retail investor dominated, and are the principle 401-k vehicle.  They still have many times more assets than ETFs.

The chart shows reversal from adding assets from the stock market bottom in 2003 through 2007 to wholesale exit in 2008.

In 2009 and 2010, there was a mixed bag of comparatively minor net asset growth and shrinkage.  In 2011 and 2012, investors were once again exiting equities, but  at an even faster rate than during the crash of 2008.

However, 2013 in the first two months shows a huge turnabout, with larger inflows to US funds than all years except 2003 and 2004 at the beginning of the last bull phase.  Levels of investment in non-US or global funds recently are at levels we have not seen in the past 13 years.

[One potential data artifact is that 2013 is the annualization of 2 months of data, compared to true full year data for prior periods]

Interestingly, even though US stocks are outperforming the rest of the world, retail investors are putting over twice as much net new money into non-US or global funds as into US equity funds; while at the same time US stocks are rising and most other stocks are falling.

Are retail investors misinformed? Or, are they seeking to buy international markets when they are down in a “buy-low, sell-high” effort?

In a stock rally you might expect these things to happen, but they are not:

• Small-cap stocks tend to lead the large-cap stocks
• Consumer cyclical stocks tend to lead the consumer staples stocks
• High volatility stocks tend to lead the low volatility stocks
• Growth stocks tend to lead the value stocks
• The Broad index tends to lead the high yield index.

Instead of more aggressive stocks leading this rally, we have more defensive stocks leading.  It is a bit hard to imagine a rally going on long and far on the back of defensive stocks.  It could happen, I suppose, but that’s not the way it is usually done; and that is a reasonable basis for caution.

So here is the year-to-date rally.  It is up nicely so far in this percentage performance chart.

But, here are the non-confirming charts we listed above.  Each is a ratio of the performance of one index to the other.  To confirm the rally, you would expect the charts to be trending up.  A down trending chart is a negative divergence that is some cause for caution.  These are all trending down or the uptrend has recently been broken.

Russell 2000 Small-Cap / S&P 500 Large-cap

S&P 500 Consumer Cyclicals / S&P 500 Consumer Staples

S&P 500 High Volatility (Beta) / S&P 500 Low Volatility

S&P 500 Growth Stocks / S&P 500 Value Stocks

 S&P 1500 Index / S&P 1500 High Yield Dividend Aristocrats

There is also no confirmation from key countries such as Germany (EWG), China (GXC) and Brazil (EWZ).  Japan (EWJ) is rallying, but only on enthusiasm for an all-in/last-ditch efforts at stimulation.

We would feel a lot more confident in this S&P 500 rally if the small-cap stocks, growth stocks, high volatility stocks and cyclical stocks were in the lead, but they are not.

The takeaway is confirmation of what should be common knowledge for long-term investors, but common knowledge is often worth repeating — don’t own stocks unless you understand and expect that a 10% decline from the 52-week high is likely multiple times per year, and that those declines need to be taken in stride — some other factors (e.g. fundamental, technical, macro, or investor needs specific) should come into play other than just a simple 10% price decline to exit stock positions, for those who are not traders. Stocks are highly variable in price and should not be owned without an understanding and tolerance of that fact.

It is easy to believe that you are risk tolerant in up market periods, only to discover that you are not so risk tolerant in periods of market correction. Careful consideration of stock price volatility, and construction of an appropriately risk balanced portfolio is important.

Looking at the price range by calendar quarter over 120 quarters (30 years) and determining if at any time during a quarter the price of the index was either at least 10% below the 4 quarter trailing high (a “correction” or worse), or at least 20% below the 4 quarter trailing high (a “bear market”), these data result:

• 57% of quarters have a price at least 10% below the 4 quarter trailing high (average 2.27 times per year)
• 18% of quarters have a price at least 20% below the 4 quarter trailing high (average 0.73 times per year)

The distribution of those events in time isshown in this bar chart.

A more liberal look, allowing for price levels that are extremely close to negative 10% or negative 20% (essentially touching the thresholds), results in these data:

• 63% of quarters have a price at least 10% below the 4 quarter trailing high (average 2.50 times per year)
• 22% of quarters have a price at least 20% below the 4 quarter trailing high (average 0.87 times per year)

The distribution in time is shown in this chart.

An obvious question is how often a 10% decline turns into something worse. Looking at the frequency of a 10% decline continuing to a 15% or greater decline, or a 20% or greater decline, these are the data from the past 30 years:

• 10% declines proceed to 15% or greater declines 31% of the time
• 10% declines proceed to 20% or greater declines 16% of the time

The distribution in time is shown in this chart.

Here are the actual quarterly price charts from 1983 through 2012 that plot the 10% and 20% levels below the 4 quarter trailing highs as a dashed red line and a solid red line respectively: