Friday, the S&P 500 was UP about 0.5% to 2008 (rounded).
VIX fell about 4% to 12.09.
The yield on the 10-year Treasury Note remained 2.45% at
the close; the bond Ghouls remain worried.
(This may actually be foreign demand driving down yields rather than
fear of an economic decline.)
CRACKS IN THE RALLY?
RSI (14-day SMA) was 83 Friday at the close. 70 is the overbought
value for this indicator. The S&P 500 is still around its upper trend line
on the charts so the RSI may be a warning of a pullback. A 5% decline would be perfectly normal. The daily up/down moves in the market
continue to be abnormally small and that usually leads to a pullback of some
kind. I doubt that it will be the “big one”. MAYBE NOT…
One indicator I like to follow is the “percent above the 200-dMA”. Friday the S&P 500 index was only 6.6% above its 200-dMA. Somewhere in the 7-10% above the 200-day is where I’d expect the rally to fail, so it would appear that this market can go higher. Sentiment is 80%-bulls and the trouble point is now 84%.
CONCLUSION
It looks like we’re nearing a top, although again, I don’t
see this as a huge decline coming.
FED’S RATE SHADOW (WSJ) 3 Sept 2014
“The Federal Reserve looks poised to start raising rates
by the middle of next year and a quick glance at history suggests there is
little to worry about…[but] two economists looked at where the rates of
longer-term Treasurys implied the fed-funds rate would be…[and developed a so
called “shadow fed funds rate”] Ms. Wu and Ms. Xia found, [that the shadow
rate] did a much better job at explaining what happened to the economy than the
fed funds rate. As of July, the shadow rate was negative 2.8%....William
Sterling, chief investment officer of investment management firm Trilogy Global
Advisors, [notes that] the bulk of the increase in the shadow rate would occur
before the Fed raised its target. In other words, investors waiting for the Fed
to make its move may end up waiting too long.” Story at…http://online.wsj.com/articles/investors-should-fear-feds-rate-shadow-heard-on-the-street-1409776191
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) remained 52% 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 +56 (It was +124 Thursday). The 10-day moving average of change in the spread dropped to -10. In other words, over the last 10-days, on average, the spread has declined by 10 each day.
Internals remained neutral on the market, but now only Breadth remains positive. Deterioration in internals is continuing and this divergence may presage a decline soon – Monday?
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 other
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
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.
