Sentiment
was 69%-Bulls at the close today and the 5-day moving average was 67%-Bulls. These are both high numbers and, as I noted
yesterday, have almost always resulted in a pullback of at least 6%. A 6% pullback would put us back around the recent
S&P 500 low 1257. If we do revisit
the prior low, we should be able to tell if we are going to bounce up or drop
further by analyzing market internals.
To
list just a few issues troubling investors: there has been a lot of talk that
we are reaching oil price levels that will cause problems for the economy; QE2 is ending this summer (by artificially keeping
interest rates low the Fed has forced people into the stock market); Ford will
idle plants in Belgium for 5-days due to parts shortages associated with the
earthquakes; Toyota will temporarily shut down all of its North American
factories because of similar parts shortages (more impacts to show later?);
political unrest continues in the Middle East; and one more, as noted above, the
National Debt is not being addressed.
From
a technical standpoint Sentiment is too Bullish; the S&P is 10.5% above its
200-day moving average; the VIX is still higher than it was before the high of
1243; leadership is failing (since 16 Feb, Nasdaq 100 is trailing the S&P
500 as is Apple )…well you get the idea.
In
spite of all the negatives the S&P has been holding around the 1333 mark. I am doubtful that will last. I still feel that we will at least retest the
recent low of 1257 and may go below that level.
As always…we’ll have to wait and see.
NTMS
switched to SELL on 22 February. Since
then, NTMS analysis has been Sell or Hold (it’s Hold today); therefore, I am
still conservatively positioned with only 30% invested in stocks.
