My Smart money indicator tracks what the professional traders are doing in the last hour of trading. The “pros” generally only trade the last hour. Currently they are selling and have been for the last 2-months. While the overall S&P 500 has moved up 3%, market-action in the last hour has been down nearly 2%. So while the market has been moving up, the pros aren’t buying it. I’m not using this indicator to make decisions now, but the results don’t make me too optimistic, that’s for sure.
CATEPILLAR – from THE
STREET
“The company reduced its
earnings forecast to $12 to $18 a share in 2015, down from its prior forecast
of $15 to $20 a share. Caterpillar attributed the reduction to a
greater-than-expected slowdown in economic growth as well as declining commodity
prices… The company emphasized its belief that the global economy will not slip
back into recession.” Full story at…http://www.thestreet.com/story/11718125/1/caterpillar-cuts-2015-earnings-forecast-hot-trends.html
Caterpillar may be the
most followed cyclical stock in the NYSE, so this news (along with downbeat
forecasts from the transportation companies FED EX, UPS, and Norfolk Southern) is
a concern for the future. The Wall
Street journal had an article today that pointed out that the transportation
stocks have not participated in the recent rally. The cornerstone of the Dow Theory is how the
transportation stocks are doing so many Dow theorists are calling for a
downturn in the major indices. (The
theory is that the transportation stocks predict the future of the economy – if
the shippers aren’t shipping, it may portend bad things for the economy in
general.) The Dow transportation index
was down 6% last week alone.
My own recession indicator (comparing the Morgan Stanley Cyclical Index to the S&P 500 index) is neutral at this point. The Morgan Stanley Cyclical Index had been outperforming the S&P 500, but as of today the Cyclical index is down about 1% over the last 10-days so, I’d say the indicator is now neutral. As recently as last week this indicator was clearly indicating “no-recession.” (This indicator is another one I follow, but I don’t use it for buy/sell calls. I need to do a lot more back testing before it becomes a part of the NTSM analysis.)
MARKET
RECAP
Tuesday the S&P 500
finished down about 1% to 1442 (rounded).
VIX rose 9% to 15.43.
NTSM
The
NTSM analysis remained HOLD Tuesday.
Sentiment
was surprisingly bullish (actually a bearish indicator since sentiment is a
counter indicator) at 59%-bulls as of yesterday. Currently, the NTSM sell indicator for Sentiment
would be 67% bulls, so sentiment has a ways to go before that one indicator
goes south. While the VIX was up 9%
today, the NTSM VIX indicator is not threatening sell yet, but that could change if
we have a few more days like today.
We
were due for a pull back so one day doesn’t mean much.
MY INVESTED POSITION
Based on the BUY signal, 6
July, I moved back into the market on 9 July (after the weekend) at S&P 500
1352.
I currently have a 50%
stock allocation overall. For my age,
that is what many advisors recommend as a fully invested position, however, I
am normally much more aggressive. I have
less invested in stocks now because there’s a lot of risk.
