The long-term spread between the Morgan Stanley Cyclical Index and the S&P 500 continues increase. At this point, this is not a concern since the Cyclical stocks are going up too. Even though the charts I’ve posted are similar to precursors of previous market declines (http://navigatethestockmarket.blogspot.com/2012/12/ntsm-cyclical-index-spread-increasing.html), unless the spread starts getting steeper and the Cyclical stocks start falling too, this isn’t a negative for the overall market.
MARKET RECAP
Wednesday the S&P 500 was down 0.76% to 1436 (rounded). VIX was up over 11% to 17.36. (Who woke up the Options Boys?!)
NTSM
Wednesday the NTSM analysis switched to HOLD
as volume moved to the downside. Sentiment increased to 63%-bulls at the close on Tuesday. (I am always a day late on this indicator unless I stay up late to collect today’s, Wednesdays, data.)
The sell point is currently 67%-bulls for the
Sentiment indicator. I say, “currently”
because this indicator varies with the sentiment trends over the past year and
a statistical analysis of that trend. It
could easily move to SELL in a day or two if the buy-the-dip crowd moves
in.
MY THOUGHTS
A Sell in the sentiment indicator wouldn’t
push the entire system to sell, but it calls into question whether I should be
buying back in at this point. I missed buying-the-low
at 1353 and the move has been straight up since then, so the market is due for
a breather. We’ll see low-volume over
the Holidays, so it’s anybody’s guess where the market goes, especially with
the Fiscal Cliff still out there. At this
point, I have earned 10% this year – I’d rather not try to be a hero. I am inclined to stand pat and buy later,
perhaps at the end of December, assuming the market doesn’t deteriorate. Who knows?…let’s see what happens. As I said yesterday, this is not an exact
science. However; if I wanted to get
back in the market now, I’d be inclined to invest only 50% in stocks. I think caution remains the watch-word.
In the mean-time, I have a lot of work to do analyzing
the 1353-low to figure out why the Wall Street algorithms bought before I did. I’ll post more on that later.
MY INVESTED POSITION
Based on the SELL signal, 7 November 2012, I
moved out of the stock market at 1377 on the S&P 500. Because of the negativity I have noted from
Hussman and others, I am currently invested in a range of near 15% invested in
stocks. NTSM now has a BUY in effect as
of 18 December, but my tentative plan is to buy back into the stock
market late in the month - wait and see.
