V.15:12 (535-539): The Investor Preference Index by Cyril V. Smith Jr.

This indicator, a long-term stock market investment tool, compares the performance of the S&P 500 to the New York Stock Exchange index to measure sentiment. The theory is that investors have a preference for certain types of invest-ments, blue chips versus mid-cap, during phases of a bull market. See what this indicator says lies ahead.

No financial topic has evoked more interest in recent years than predicting when the current bull market in stocks will end. On one side of the argument are the buy-and-hold adherents, whose methodology has scored remarkable success since the early 1980s. To them, a correction may be inevitable but immaterial, since the long-term trend is up. Those on the other side of the argument — the market timers — have attempted to call when the bull market high will occur, but have had little success to date. Market experts have attempted to call the top based on the price series alone, using such techniques as Elliott wave theory and chart formations, including the broadening top pattern. An influential group has relied on traditional market guidelines such as price/earnings ratios to point out that by these standards, the market is overvalued and due for a correction. And some Wall Street gurus have relied on proprietary economic analyses to call a top. Late in 1996, Federal Reserve Board chairman Alan Greenspan used the term bubble to characterize the current market.