Friday, March 14, 2014

Consumer Sentiment…NTSM still says Sell

“Consumer sentiment dipped modestly in early March, entirely due to reduced expectations for the future, a survey said on Friday. The preliminary Thomson Reuters/University of Michigan overall index of consumer sentiment fell to 79.9 in March, down from the 81.6 final reading in February. That was below analyst expectations for a reading of 82 and the lowest level for that index since November.” Story at… suggested that the drop in sentiment was meaningless since as long as jobs keep increasing, then there will be more spending.  Summary and charts at…

NIKKEI SUGGESTS TROUBLE FOR THE US MARKETS (Chris Kimble posted at Advisor Perspectives)
"The prior two times the Nikkei broke down from this pattern at resistance, in time the S&P 500 followed it…[keep] your eye on this leading index, because continued weakness by the Nikkei could impact the S&P 500.”  Chart and commentary at…

Friday, the S&P 500 was down 0.3% to 1841 (rounded). 
VIX rose about 10% to 17.8. 
The yield on the 10-year Treasury Note remained at 2.65%.
VIX was up a lot today and that’s usually not good for the markets.  Market internals remained poor.  It looks to me that we are seeing a renewal of the correction that started 31 December at S&P 500 1848.  The Index only got 2% above 1848 in the last 10-weeks and seems to have stalled with the most recent high of 1878. 

As I noted yesterday, it is hard to know whether this is just another false alarm move back to the 50-dMA at 1829 or the lower trend line (now around 1780).  The 200-dMA is 1736, about 6% below today’s close and that is a support point.  Of course anything is possible based on news related to China’s economics or geo-politics related to Ukraine.  Meaningful sanctions against Russia will be harmful to the stock markets, as I noted earlier.

For the day, advancing stocks outpaced declining stocks with 58% advancing.  That’s a bit of a surprise that most stocks on the NYSE were advancing while the S&P 500 declined.  The majority usually wins, so baring bad news, Monday would be expected to be an up-day.  This weekend will be news-worthy with the Crimean election.  It is expected that they will vote to join Russia so this is a story to follow.

The 10-day moving average of stocks advancing fell slightly but remained at 49% at the close.  (A number below 50% for the 10-day average is generally bad news for the market.)   New-highs outpaced new-lows Friday.  The spread (new-highs minus new-lows was +12 .  (It was +27 Thursday). The 10-day moving average of change in the spread was minus-19. In other words, over the last 10-days, on average, the spread has decreased by 19 each day. The 10-dMA of up-volume continues to fall.  The internals remain negative on the market.

Market Internals are a decent trend-following analysis of current market action, but should not be used alone for short term trading. They are usually right, but they are often late.  They are most useful when they diverge from the Index.  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 like 2013.
The NTSM system remained SELL, Friday based on 2-indicators: Sentiment at 80%-bulls and VIX that has been rising recently and was up another 10% or so today.  Volume and Price indicators are neutral.  VIX is at its upper trend line, so if VIX breaks higher than 18 next week it would be another clue that this is really a correction.


Today, March 14, I reduced to 30% invested in stocks because of the NTSM sell signal on 13 March.  This is a conservative stock allocation commensurate with the NTSM Sell signal.  Leaving 30% invested hedges the bet in case NTSM is wrong – no system is perfect.