REUTERS – “Wall Street
Week Ahead: "Fiscal cliff" blues may lead to correction”
“The benchmark Standard
& Poor's 500 closed below its 200-day moving average - a measure of the
market's long-term trend - on Thursday for the first time in five months, and
ended below it again on Friday. More than half of the Dow components are
trading below key technical levels…."I don't think you have to panic here,
but I think you really want to be looking for the market to move lower for the
next couple of months," said Frank Gretz, market analyst and technician
for Wellington Shields & Co., a brokerage in New York.” Full story at…http://finance.yahoo.com/news/wall-street-week-ahead-fiscal-002515955.html
MARKET
RECAP
Friday the S&P 500 rose
0.2% to 1380 (rounded) and VIX rose 0.4% to 18.57.
Again, again, again…{creeps
at this petty pace…(sorry Macbeth)} there was late-day selling – again, again,
and again, negative for the markets.
NTSM
The
NTSM analysis was HOLD Friday, but it was so close to sell it’s hardly worth
calling it a HOLD.
That’s
not unusual though. Typically the NTMS
analysis switches to HOLD a day or two after a sell signal when the market
undergoes its typical bounce. If it
follows a normal pattern, selling will resume next week, and NTSM will switch
back to sell.
Breadth, measured as the
%- of stocks advancing, showed some improvement today on 10 and 20-day moving
averages, but not on longer term measures.
New-highs vs. new lows
were falling over 10-day, 20-day, and 40-day moving averages; even today’s
spread (new-highs minus new-lows) was worse than yesterday and that is on a day
when the S&P 500 advanced. The
bottom line? Market internals are not
looking good and further selling is coming.
MY INVESTED POSITION
Based on the SELL signal,
7 November 2012, I moved out of the stock market. Because of the extreme negativity I have
noted from Hussman and others, I am currently invested in a range of near 15%
invested in stocks. I also took short
positions on the morning of the 8th that make me currently net short
the S&P 500. (I am using Guggenheim
(formerly RYDEX) funds and 2x Short ETF, SDS.
Those are dangerously volatile so I don’t recommend them unless you have
a BIG tolerance for risk. Also, if they
are held too long they may not perform well.
REPEATING STRATEGY: As
I have noted before, others may choose to keep more invested in stocks without
too much damage to their portfolio if the invested % is low. For example, if one were to keep 30% invested
in stocks and the market crashed by 50%, the loss to the portfolio would only
be 15%. If that is your plan, keep the
low-beta stocks (those with lower P/E ratios) such as utilities, consumer
staples, or value oriented mutual funds.
Sell technology. Keeping 30%
invested in stocks is actually a pretty good strategy since it hedges the bet
if the market continues up after a sell signal.
To
be clear I am not predicting a crash; but there seems to be a lot of risk now.
