“Stocks are likely to take their cue from the bond market
in the coming week, as traders worry low yields are a warning that the economy
is not springing back…"The key indicator will be the yield on the 10-year,"
said Art Cashin, director of floor operations at UBS. "Unless the saloon
full of Fed speakers says something to move the market, you've got to watch the
10-year."… The 10-year yield, along with the entire Treasury curve, has
been moving lower, reaching 2.47 percent Thursday, the lowest level since
July.” Story at…
http://www.cnbc.com/id/101681279
MARKETS TO RISE SLOWLY (Breakout, Yahoo Finance)
“I see markets in a gradual but rocky uptrend because we
have a bewildered set of investors,” surmises…[David Kotok of Cumberland].
“Those who have missed the stock market and gave up 30-some percent now don’t
know what to do. They were afraid of stocks then and they’re more afraid of
stocks now because prices are higher. A bewildered mass doesn’t move.”
Commentary and video at…
http://finance.yahoo.com/blogs/breakout/forget-earnings-reports--we-already-have-all-the-info--we-need-to-trade-this-week--kotok-113408298.html
DIVERGENCE
It is rare to see major indices diverge.
I expect the S&P 500 to follow the leaders sooner rather than
later. Below we see the Russell 2000
(Small Cap Index) and the Nasdaq Composite have underperformed the S&P 500
by roughly 6%.
http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#symbol=%5EGSPC;range=1d
Another way of considering the same divergence is to look at the 50-day Moving Average (dMA) of the percentage of stocks advancing on the NYSE. On 18 March the percentage of stocks that have advanced over the last 50-days (on average) was 55%. That number is now 53%, so fewer stocks have been advancing recently. Still another way of looking at similar trends is to consider the number of stocks trading above their 200-dMA. That value was 59% as of Fridays’ close. It was around 70% on April 1st. Looking at charts, when this value has fallen below 61%, it has indicated trouble for the markets; it looks like we’re due for some trouble….But…market internals are almost positive so the short term may be reversing up.
THE VIEW FROM JOHN HUSSMAN (Hussman Funds)
“I’m sometimes viewed as an evil quant, sitting in a
dimly lit room, stroking a hairless cat ironically named Mr. Whiskers, and
hoping for the worst. That’s undoubtedly because of my view that all of the
market’s gains since roughly April 2010 are likely to be wiped out in a rather
ordinary completion to the present market cycle…
…While we certainly hope to provide evidence and data
sufficient for disciplined investors to maintain their confidence in our
full-cycle approach, we have no particular desire to convert disciplined
buy-and-hold investors or reckless speculators to our views… …Meanwhile, given
that the majority of my income is directed to charity, I have a rather vested
interest in doing good for others over time (undoubtedly, my particular focus
on finance and autism research demands unusual patience, long horizons, a deep
respect for evidence, and no expectation that progress evolves smoothly)…Accordingly,
I am changing my guidance. For those investors who trust our analysis and
discipline, no change of course is encouraged. But for those who find our work
to be a constant source of irritation to be regarded with open disdain, I am
retracting all of it herewith – for you alone mind you – and I leave you free
to buy with both hands to whatever extent you are inclined. Not that I encourage it really – that would be
bad Karma – but someone is going to have to hold equities at these prices. It
would best be those who are fully aware of our concerns and prefer to reject them.
So the more you dislike my work, and particularly if you are nasty about it, I
have no objection to you accumulating – perhaps on margin – as much stock from
other investors as possible.” – John Hussman, PhD, Hussman Funds Weekly Market
Commentary at…http://www.hussmanfunds.com/wmc/wmc140519.htm
MARKET REPORT
Monday, the S&P 500 rose about 0.4% to 1885 (rounded).
VIX fell about 0.2% to 12.42.
The yield on the 10-year Treasury Note rose slightly to 2.54%
at the close.
The Bond Ghouls are still worried.
The S&P 500 Index has closed within 1% of its all-time
high 17-times since 1 Jan 2014. This
number has changed slightly as the market made new highs. Still the “stalling” market is disconcerting
and the Index must make significant new-highs or the correction will be
underway. Up-volume is the worst
performing market internal right now; are the markets running out of
buyers? Possibly, but those who have
shorted in anticipation of a top have been slaughtered all thru 2013 and so far
in 2014.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing on the NYSE
increased to 52% at the close. (A number
above 50% for the 10-day average is generally good news for the market.) In
another reversal, New-highs outpaced New-lows Monday. The spread (new-highs minus new-lows) was +92
(It was +41 Friday.) The 10-day moving average of change in the spread was +4. In other words, over the last 10-days, on
average, the spread has INCREASED by 4 each day. The smoothed 10-dMA of up-volume
remained DOWN today. The internals remained
neutral on the market today, but not by much.
Only up-volume is negative, and then, just barely.
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.
NTSM
The NTSM analytical model for LONG-TERM MONEY remained
HOLD Monday. Sentiment remained a very
high 84%-bulls (5-dMA of {bulls/(bulls+bears)} for funds invested in selected
Rydex/Guggenheim funds. On a statistical basis, Sentiment is negative. Price, Volume & VIX indicators are neutral.
MY INVESTED POSITION
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 stockholdings.
--INDIVIDUAL VALUE STOCKS (New Feature)--
ENSCO (ESV): HOLD
For discussion see:
Motley Fool suggests that the owners of floating rigs have overbuilt and rig-rentals and revenues will fall in the future. Commentary at…
http://www.fool.com/investing/general/2014/05/13/these-offshore-drillers-have-made-a-big-mistake-2.aspx
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 at least
25-stocks to be “diversified.”
