MARKET
Wednesday the S&P 500
finished unchanged to 1341. The VIX fell
4% to 17.95. That is positive for the
market and the drop in VIX triggered a buy in the VIX indicator within the NTSM
model
NTSM
The NTSM analysis is BUY
again today, Wednesday. VIX kept NTSM in
the BUY mode with help from the Price indicator. VIX is the most reliable indicator in the
system followed by Volume.
On the worrisome side
(there’s always something to worry about) Sentiment has been climbing steadily
and now is 55%-bulls. That’s getting
elevated.
The NTSM sentiment
indicator is based on a 5-day moving average of the {amount of $ bet long (bulls)} divided by the {amount
of $ bet long + amount bet short} in selected RYDEX mutual funds. That’s %-bulls ignoring those who are
neutral. The indicator is a sliding one
that is based on a daily statistical analysis calculated from the past year of
sentiment data. Currently the sell point
stands at 67%. The reason I use a
sliding scale is that investors learn from the past and modify their behavior. For example, Sentiment at the low in 2002 was
33% bulls. In 2009, Sentiment was 15%
bulls at the low because investors remembered the last bear. For that reason, you can’t just set an
arbitrary Buy or Sell point for %-bulls.
Even with adjustments,
Sentiment is not a tradable indicator by itself since its buy or sell signals may
be quite early or late.
MY INVESTED POSITION
Based on the BUY signal
Friday, 6 July, I moved back into the market on 9 July and I now have a 50%
stock allocation. I am underweight my
usual allocation for stock because there’s a lot of risk out there – even if
NTSM has repeated its BUY signal 3 out of the past 4-days.
