Wednesday, May 29, 2013

The Trend is Down…

I am tired of trying to call a top.  I think the markets are in a topping process, but where we are in that process is, more-or-less, anybody’s guess.  Here’s a note from a trader board; this trader isn’t pulling any punches.

Watch the SPX 1650 weekly close; a close under 1650 on Friday means the long awaited correction, since Ben announced QE3 in 2012, is here.

“The European Central Bank said weakness in the euro-area economy and the fragility of the region’s banks risk ending what it describes as the calmest period in financial markets since 2011…“The prospects for the euro area remain well below those for international peers –- including major advanced and emerging market economies,” the ECB said. “Both private and public sector forecasts indicate an only gradually improving near-term economic outlook in the euro area. The latest ECB staff projections suggest a gradual recovery in the second half of this year, largely driven by a pick-up in domestic demand.”  For the story see the following…

The 10-dMA of breadth began falling (and thus diverging from the S&P 500’s rise) about 3-weeks ago as indicated on the below chart.  Wednesday, the 10-dMA of percent advancing stocks fell to 47%.  (Below 50% for this indicator usually spells trouble.) Green is the 10-day moving average of percent advancing.  It has closed below 50% two of the last three trading-days.
 Other internals are negative too.  It appears that the trend is down and I’d expect the S&P 500 to follow.  Even if it does swing back to the upside, I suspect that the S&P 500 is not likely to get above its previous high.  Perhaps we’ll finally see a correction!
Wednesday, the S&P 500 closed Down 0.7% to 1648 (rounded).
VIX was UP 2% to 14.83.
Wednesday, the overall NTSM analysis was HOLD at the close.
The NTSM indicators are as follows:
SENTIMENT is negative at 69%-bulls (5d-MA); PRICE is positive; VOLUME is neutral, but trending down; VIX is neutral, but trending down.
I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…(although that probably looks pretty lame by now.)
The NTSM system sold at 1575 on 16 April.  (This is just another reminder that I should follow the NTSM analysis and not act emotionally – I am under-performing my own system by about 2%!)
I have no problems leaving 20% or 30% invested.  If the market is cut in half (worst case) I’d only lose 10%-15% of my investments.  It also hedges the bet if I am wrong since I will have some invested if the market goes up.  No system is perfect.