Friday, May 9, 2014

Cash is Best Place to be - Faber

“The most underappreciated asset is cash. Nobody likes cash. Cash for the next 10 years you earn precisely zero. [Even so] for the next six months opportunities will come along for a long time.” – Marc Faber at…

In my analysis (see NTSM paragraph below) I remain fully invested, but warily so.
“The civil forfeiture law — if something so devoid of due process can be dignified as law — is an incentive for perverse behavior: Predatory government agencies get to pocket the proceeds from property they seize from Americans without even charging them with, let alone convicting them of, crimes. Criminals are treated better than this because they lose the fruits of their criminality only after being convicted.” – George Will at…

Friday, the S&P 500 was UP about 02. % to 1878 (rounded).
VIX FELL about 4% to 12.92. – Correction? The option boys don't think so.
The yield on the 10-year Treasury Note rose slightly to 2.62% at the close.
The Bond Ghouls remain worried about the stock market.  If the smart money is selling stocks, some are buying bonds, although Art Cashin did suggest that the rally in bonds is due in part to foreign buying.
I’m going to repeat this point until the S&P 500 breaks thru the old highs: The S&P 500 has closed within about 1% of the all-time high of 1891 24-times since 1 Jan 2014. It needs to punch higher or the correction will be back.
The 10-day moving average of stocks advancing on the NYSE increased to 53% at the close.  (A number above 50% for the 10-day average is generally good news for the market.) New-highs outpaced new-lows Friday.  The spread (new-highs minus new-lows) was +10. (It was +103 Thursday.) There were only 63 stocks advancing today. The 10-day moving average of change in the spread was minus-3.  In other words, over the last 10-days, on average, the spread has DECREASED by 3 each day. The smoothed 10-dMA of up-volume turned up today.  The internals remained neutral 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 analytical model for LONG-TERM MONEY remained HOLD Friday.  Sentiment dropped slightly to 83%-bulls (5-dMA of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim funds. On a statistical basis, Sentiment is negative.  Price, VIX & Volume indicators are neutral, but are quite close to positive values.

I increased my stock allocation to 50% invested in stocks on 26 March because of the NTSM indicators turned positive 24 Mar at the close.  50% in stocks is fully invested for me, given my age (semi-retired) and the risk inherent in today’s stock market. I am watching closely to see if it is time to reduce my long-term stock holdings.

                             --INDIVIDUAL VALUE STOCKS (New Feature)--

For discussion see:
Research has shown that to have a diversified portfolio no one stock should be more than 4% of the portfolio total, or stated another way, if your total portfolio consisted of individual stocks, you would need 25-stocks to be “diversified.”