Tuesday, May 6, 2014

Coppock Curve Says Stock Crash Now…Blow-off Top…S&P 500 Top is Near

Here is a collection of cheery market calls for all you bears:
“The Coppock Curve's message is straightforward: Get out of the market and stay out until at least the first quarter of 2015. After five years of upside, the old trading saw comes to mind: bulls make money, bears make money, but pigs get slaughtered.” Commentary at...http://www.investing.com/analysis/coppock-market-message:-get-out-and-check-back-in-q1-'15-211608
“Interestingly, the NASDAQ index has traced out a textbook example of this [head-and-shoulders] pattern…If this…pattern plays out, the NASDAQ should experience a major… decline…If the NASDAQ surpasses the high of 4,371 and moves higher, the head and shoulders pattern is negated. If the NAZ fails to rally to new highs, that could be a signal that the rally from 2009 is reversing or has entered a new phase.” -  Charles Smith. Commentary at…
“Typically, markets have two moves up with an intermediate decline of 60%, and we did see that. What we do is look for a market at that high that looks similar to what took place at the intermediate correction and the New York stock exchange, you have the charts there, it shows that from the peak in July 2011 into the October 4th low, 62 trading days. We inverted that chart and we're currently at 62 days. We're saying right now we're getting the inversion of what occurred into the low on October 4th at this peak, and we should see a high -- once we go above the recent highs and have a new recovery high close, we should exhaust the market.” - Thomas Denmark, Denmark Analytics. Commentary from CNBC, the Santelli Exchange, Video and transcript at…
They could be right.  Right now, my indicators aren’t showing such a negative view, but that would change very quickly if market participants decide these guys are right.
Tuesday, the S&P 500 was DOWN about 0.9% to 1868 (rounded).
VIX rose about 4% to 13.80.
The yield on the 10-year Treasury Note fell to 2.59% at the close.
The Bond Ghouls are worried about the stock market.  If the smart money is selling, some are buying bonds.
RSI closed at 68 Tuesday.  That is neutral, but the damage has been done with overbought readings the prior 3-trading days.  It will be a while before we get an oversold reading.  We might not need to wait that long though.  The S&P 500 is only 5% above the 200-day moving average (dMA) and is nearly at the 50-dMA now. I think a drop to the 200-dMA is more likely than a reversal now.
I’m going to make 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 20-times (prior blogs had a typo here) since 1 Jan 2014. It needs to punch higher or the correction will be back.  The prior high was 1891.
The 10-day moving average of stocks advancing on the NYSE declined to 50.0% 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 +49.  (It was +56 Monday.) The 10-day moving average of change in the spread was minus-8.  In other words, over the last 10-days, on average, the spread has DECREASED by 8 each day. The smoothed 10-dMA of up-volume continued to decline today.  The internals remained neutral on the market, but only because Breadth is neutral at 50% advancing; otherwise Internals would be 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 analytical model for LONG-TERM MONEY remained HOLD Tuesday.  Sentiment was 84%-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.

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.  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--
The techniques I use to identify a bottom can be used to find turn-around possibilities in individual stocks so here is one I bought today.
Ensco is an oil rig owner that leases rigs. ESV made recent highs in Nov of 2013 around 62. Since then it has been generally falling.  It made an initial low on 13 March 2014 on high volume and lower lows 14 and 17 March on greatly reduced volume.  Recently, it has made higher highs and higher lows.  Technically, this looks like a good buy point.
Fundamentals hint at a turnaround with higher rig-utilization expected.  ESV currently has a 6% dividend yield so I am well compensated while I wait for improved performance in the stock price.  With a current P/E of 8.5 this is a true value play. Here are a couple of videos…
The Street:
Motley Fool:
Do your own due diligence. A broad economic downturn could pose problems for oil services companies.
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.”