Tuesday, August 27, 2013

Correction On!

Today the S&P 500 closed 1.7% below the 50-day moving average, now at 1660.  That will convince many to throw in the towel and sell; thus the correction is likely to pick up some steam even though some stats suggest an up-day Wednesday. 

MARKET TECHNICALS TAKE SHAKY LATE-AUGUST TURN (MarketWatch) — “The major U.S. stock benchmarks have taken a technically shaky turn amid renewed geopolitical tensions…the S&P 500’s backdrop highlights the headline technical issue…The index continues to vacillate at its 50-day moving average — currently S&P 1,660 — and this area remains a useful bull-bear technical gauge.” Story at… http://www.marketwatch.com/story/market-technicals-take-shaky-late-august-turn-2013-08-27-131033326

“For the first time since the most recent rally began in November, S&P 500 futures have retested (and broken below) the 100-day moving average within days of a previous break (without making new highs). It would appear the…[buy the dip]…mentality is less exuberant with war and a tapering Fed in the background.”  Story at…

Monday, the S&P was down 1.6% to 1630 (rounded) at the close.
VIX was up 12% to 16.82. 

Today’s move was a statistically significant in price and volume and that may signal an up-day tomorrow; the statistics show this is true about 62% of the time.  This pattern is a bit less secure in a correction, because at some point there will be a waterfall-drop where, statistics be dammed, the market will go down sharply.        

The 10-day moving average of stocks advancing on the NYSE fell to 42% at the close.

New-lows outpaced new-highs today leaving the spread at -61 (it was +76 yesterday), with the 10-day moving average of change in spread now trending down strongly.  (5-days ago it was up strongly.)

Today’s reading of Internals is negative on the market and suggests further downside ahead. 

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

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  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.