In response to several
comments, here is my general investment strategy for non-stock positions. As a semi-retired person,
I am currently “fully” invested roughly as follows:
50%-Stocks (primarily ETF’s
with S&P 500 in the retirement account)25%-Short-term Bonds (mutual fund)
25%-Junk Bonds (mutual fund)
The bond percentages are rough, since I still have small positions in GNMA and a few other bond funds, just to keep the accounts open. I sold most of them last year (too early) when the yields started rising.
Junk bonds tend to act
like stocks and will fall in a declining economy so if I suspect a major crash,
I’ll sell High-yield bonds too. (That’s
because there is default risk in high-yield funds if the economy is slowing.) Junk
is currently more at risk because so many people have piled into it, there
could be a panic to get out.
When I sell stocks for
NTSM sell signals, I move excess cash to a Money Market fund, so if I am 50%
invested in stocks, and switch to 30% invested, the difference is going to
money market fund. If is suspect a significant crash, I will short using the
cash from stock sale.
Last, 50-50 is a balanced
portfolio for those close to, or in retirement.
A conservative rule of thumb is to limit stock investments to the
percentage defined by “Your Age minus 100.”
If you are 30, that would give a 70% allocation to stocks. I have a former co-worker who is about
50-years old who maintains 100% in stocks and always has. He has a strong tolerance for risk. Remember, it’s your money and only you can
really decide how much is “fully-invested” for you. If you are worrying about your investments,
or losing sleep, you probably have too much in the stock market.
MARKET REPORT
Friday, the S&P 500 was up
about 0.3% to 2003 (rounded). VIX was UP about 0.8% to 12.15.
The yield on the 10-year Treasury Note was up slightly to 2.34% at the close; the bond Ghouls remain worried. (This may actually be foreign demand driving down yields rather than fear of an economic decline.)
Volume was nearly normal; it was only about 5% below the
average for the month. Art Cashin, CNBC, suggested that traders were covering short positions for the weekend and that led to more volume and a good day for stocks.
There has been late-day buying for the past few days and
that is positive.
RSI (14-day SMA) was 88 Friday at the close. (It was 88
Thursday, too, but I reported the RSI calculated using a different methodology
by mistake.) 70 is the overbought value for this indicator.
The S&P 500 reached its upper trend line today on the
charts so that could make for some choppy trading next week as the summer ends
and traders get back to business.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks
advancing (NYSE) rose to 59% at the close Friday. (A number above 50% for the 10-day average is
generally GOOD news for the market. The
average in a normally rising market is 53%.) New-highs outpaced New-lows Friday. The spread (new-highs minus new-lows) was +169
(It was +109 Thursday). The 10-day moving average of change in the spread was +10.
In other words, over the last 10-days, on average, the spread has INCREASED by
10 each day.
Internals remained neutral on the market because the
smoothed 10-dMA of UP volume continues to fall.
This may be the result of low volume overall. Low overall volume means
that Up-volume is also low, so this may not be too meaningful now. All other Internals look good.
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
Friday, the NTSM is
HOLD. The volume indicator is Positive.
All pther indicators are neutral. 
MY INVESTED STOCK POSITION
I made a BUY call on Monday, 18 August 2014 because the charts were looking better; therefore, I upped my invested percentage to 50% invested in stocks on Tuesday 19 August. The 5-10-20 Timer and Market Internals both gave positive signals on 19 August confirming the previous day’s Buy signal. 50% is Fully invested for me since I am semi-retired.
--INDIVIDUAL STOCKS FROM A VALUE HOUND--
ENSCO (ESV): BUY
For my initial discussion see the NTSM blog at:
http://navigatethestockmarket.blogspot.com/2014/05/coppock-curve-says-stock-crash-nowblow.html
ESV has successfully tested its recent low as selling has declined at the low. Dividend is 6%. PE is 8.5 so downside is limited. I rate it BUY again even though you can find a lot of negative talk about the drillers.
