Tuesday, April 1, 2014

ISM Manufacturing Survey…

“…the ISM Manufacturing Index improved in February to 53.2 from 51.3 in January…The gains in orders, however, were not enough to keep production from contracting. That index fell to 48.2 in February from 54.8 in January. The Employment Index was unchanged at 52.3…It must be recognized that the index is not hard data of any kind, but simply a survey that provides broad indications of trends.”  Full story at…

“Activity in China's factory sector edged up slightly in March, a government survey showed, though the figure is unlikely to dispel concerns that the world's second-largest economy slowed more than expected in the first quarter. The official Purchasing Managers' Index increased to 50.3 in March from February's 50.2, the National Bureau of Statistics said on Tuesday.” Story at…

“China's manufacturing engine contracted in the first quarter of 2014, a private survey showed on Tuesday, adding to market expectations of government stimulus to arrest a loss of momentum in the world's second-largest economy this year. The final Markit/HSBC Purchasing Managers' Index (PMI) fell to an eight-month low of 48.0 in March from February's final reading of 48.5.” Story at…

Tuesday, the S&P 500 was up about 0.7% to 1886 (rounded).
VIX was down about 6% to 13.10.
The yield on the 10-year Treasury Note rose slightly to 2.75%.

Today was again a statistically significant up-day since it exceeded my price and volume statistical parameters.  This would usually (about 62% of the time) be followed by a down day tomorrow, Wednesday.  Perhaps today was a short term top.

The Index is now 8% above its 200-dMA and values of 10% have usually resulted in a pullback of some kind. Recently, those pullbacks have been only about 5% down to the lower trend line.  With no other information, that’s what I’d expect when the next pullback occurs, possibly starting now.  Currently that guess is not supported by the internals. The correction that everyone was talking about has been postponed, probably to May, after the Fed tapers for the third time. 

The 10-day moving average of stocks advancing on the NYSE remained 54% at the close.  (A number above 50% for the 10-day average is generally good news for the market.)  New-highs outpaced new-lows Tuesday.  The spread (new-highs minus new-lows was +158.  (It was +129 Monday). The 10-day moving average of change in the spread was +3.  In other words, over the last 10-days, on average, the spread has increased by 3 each day. (This change in spread stat has been positive for the last 3-days, but I may have had a typo stating otherwise.) The smoothed 10-dMA of up-volume continued up today.  The internals are positive.

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.

Final volume numbers showed that the NTSM analytical model switched to HOLD today, Tuesday.  VIX has been falling and remains positive. Price is neutral. Sentiment has fallen slightly to neutral and Volume is also neutral.  (Sentiment is still screaming high at 76%-bulls, but this is now below the statistical level measured as a multiple of standard deviations that was prevalent at the 2009 bottom.)

The 5-10-20 Timer model is positive again because the 5-dMA and 10-dMA are both above the 20-dMA and Market Internals are positive too.

I increased my stock allocation to 50% invested in stocks on 26 March because of the NTSM indicators turned positive Monday (24 Mar) at the close.   Further the 5-10-20 Timer was positive along with market internals on 26 March as they are today, 28 March.  50% is fully invested for me at this time.