Saturday, June 15, 2013

Consumer Confidence

I missed posting Friday due to access issues.  Here's Friday's Blog...
“The Thomson Reuters/University of Michigan preliminary index of consumer sentiment declined to 82.7 in June from 84.5 the prior month that was the highest since July 2007, a report today showed… ‘The stock market peaked in late May, so you may be seeing some of that being reflected in the number,’ said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, who projected a drop in the gauge to 82.5. ‘In general, the consumer is in a relatively good position.’”  Story at…

Friday, the S&P 500 was down about 0.6% to 1627 (rounded).
VIX was up about 5% to 17.15.

Interesting day! Market down, but…the 10-day moving average of breadth (percent advancing) improved from 36%, 7-days ago, to 45% today.    

New-high/new low data also reversed significantly; 2-days ago the new-lows outpaced new highs by 347.  Today, Friday, new highs outpaced new lows by 21.   That’s a big turnaround.  My NTSM buy signal is actually a bigger reversal than that, but not by too much.  Remember, the NTSM system is built for longer-term, bigger moves.

Volume was low, about 20% lower than the average volume over the last month.

Although these numbers don’t seal-the-deal, it may be that Friday was a higher-low, reversal-day.  I’d like to see some more data; I’m not great at calling bottoms based on higher-lows.

Based on this data, if I was short, I’d cover Monday if it looks like the markets are moving up.  On the other hand, some traders expect a collapse next week, at least based on discussion board posts I’ve read.  To me, it looks more like we go up.  How far? Well, the S&P 500 is 8% above its 200-dMA so it could easily go up a couple percent.  Beyond that, I don’t know.  World markets seem to be in trouble and the US is still OK (at least to uninformed investors) so there may be foreign money coming to the US stock markets supporting prices.

Friday, the overall NTSM analysis was HOLD at the close.  

SENTIMENT remains extreme:  The 5-day moving average was 69%-bulls in the Guggenheim/Rydex funds I track as of Friday’s close.   That suggests topping in the markets.

Longer term, nothing has changed, except that we may see a bounce next week.  No guarantees.

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.