1750 is the lower support line for the 1-year trend of the lower lows.
That is a major point of support for the current downtrend and would be 5% down
for the correction or about 100 points.
So far, I haven’t seen any data that would confirm the correction is
over, although the “Smart Money” indicator is hinting at an all clear. Other
than up-volume, market internals don’t look good either, even including today’s
good numbers. My guess is we retrace
down to 1750, after that, we’ll see.
LARGE COMPANY EARNINGS WEAK (Yahoo Finance)
“Earnings reports from many large companies have been
weak, forecasts have often been poor and the stocks of these firms have
plummeted… Apple Inc. (AAPL)…
missed Wall Street's best expectations for iPhone sales and posted a gloomy
forecast. …International Business Machines Corp. (IBM) -- did almost as badly. No one was
impressed with General Electric Co.'s (GE)
numbers. Figures released by the major financial firms were mostly lackluster.
Citigroup Inc.'s (NYSE: C) shares are off 6% in the past five trading days, and
shares of Goldman Sachs Group Inc. (GS) are
down 4%. Also among the major components of the S&P 500, Procter &
Gamble Co. (PG) disappointed as its razor customers
stopped shaving. These earnings leave only a few large companies that might
report strong number to turn the perception of the earnings collapse around…Looking
over all the reasons for a 10% market sell-off creates the strong impression
that the sell-off will continue, and probably accelerate.” Story at…
Today Google missed; Amazon missed…This isn’t encouraging.
CHINA MANUFACTURING CONTRACTING (Global Economic
Perspectives) “The HSBC China Manufacturing PMI shows China
manufacturing is back in contraction, following six months of barely positive
growth…Firms also cut their staffing levels at the quickest pace since March
2009… This is yet another sign of a global slowing economy.” – Mike Shedlock
Story at...
FOURTH QUARTER GDP GROWTH: 3.2%
“Consumer spending that rose at the fastest pace in three years helped the U.S. economy grow at a 3.2 percent pace in the fourth quarter, overcoming government cutbacks and laying the foundation for a stronger expansion…” Story aT...
http://www.bloomberg.com/news/2014-01-30/economy-in-u-s-grew-3-2-as-consumer-spending-picked-up.html
Curious…We’ve heard from some of the major retailers who are laying off
employees including Macy and Nordstrom, so it’s surprising that consumer
spending led the way in GDP growth.
MARKET REPORT
Thursday, the S&P 500 was up 1.1% to 1794 (rounded).
VIX was down about 0.4% to 17.29. (That’s not much of a
decline for today’s big up-day and it suggests the correction continues.
Options players remain concerned.)
The 10-year Treasury Note yield was up very slightly to
2.69%. Rates at 3% or above are considered by some traders to be
“trouble-for-stocks”.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing rose to 48%
at the close. (A number below 50% for
the 10-day average is generally bad news for the market.) New-highs outpaced new-lows Thursday, leaving
the spread (new-hi minus new-low) at +29. (It was minus 64 Wednesday). The 10-day moving
average of change in the spread fell to minus -20. In other words, over the
last 10-days, on average, the spread has decreased by 20 each day.
Overall, Internals are neutral on the market, but only
because Up-Volume was high today and that pulled the 10-dMA up. Still, Market Internals don’t look all that
good now.
Market Internals are a decent trend-following analysis of
current market action, but should not be used alone for short term trading. In
2013, using these internals alone would have made a 16% return vs. 30% for the
S&P 500 (in on Positive out on Negative – no shorting). Of course, few trend-following systems will
do well in an extreme low-volatility, straight-up year.
NTSM
The NTSM system remained SELL today.
The four areas of analysis, Sentiment, Price, Volume and
VIX are currently rated as follows:
-Sentiment is negative at 78%-bulls, slightly lower than
yesterday and down 5% from its peak. A
falling sentiment reading is typical for a correction, but usually there is
enough fear in the air so the sentiment falls very quickly as traders go
short. After 3-weeks, sentiment it is
still so high that one wonders whether it is an indication that there are buyers
ready to take the market higher. 78%-bulls
means that nearly 4 out of every 5 investors are betting long in the Rydex
Guggenheim long/short funds I track.
Incredible!
-Volume is negative (This is a variant of
on-balance-volume.)
-Price (calculates and compares the size of up and down
moves) and VIX (tracking direction and intensity of VIX) indicators are now
neutral, but both are very near negative levels. There are also a number of indicators
designed to identify tops and bottoms such as the statistical analysis
“panic-indicator” that flashed sell last Friday.
MY INVESTED POSITION
I am about 30% invested in stocks as of 20 December
(S&P 500-1540) because I upped my stock holdings by 10% on the 20th
of December. 30% is a reasonable level
of stock holdings for a correction, so I don’t need to reduce holdings since I
don’t think this will be a major crash.
Even if a surprise collapse did take the stock market down by 50%, I’d
only lose 15% in the stock portfolio. On
the other hand, if I am wrong, leaving 30% invested in stocks hedges the bet
since no system is perfect.
