There are clues the downtrend is over. Some are:
1. Statistical analysis.
Statistical analysis of the recent price and volume action of the S&P 500 shows that the size of the moves have not gotten appreciably larger after the recent bottom and this is in line with the end of prior corrections. Unless I see consistently bigger moves in price (up or down) this clue suggests correction over.
2. Market Internals.
Market Internals are now positive. In Oct 2011 my Market Internals metric turned positive 3-days after the bottom. By year-end the Index was 16% higher. This time the Market Internals metric turned positive 4-days after the bottom. I doubt that the Index will make a 16% gain before the New Year, but I think it will be higher.
3. Chart (see below)
The chart has not yet confirmed “correction over”. It has closed within the old long-term,
uptrend channel indicated by the Green lines, but just barely. The S&P 500
must break the downtrend shown in the chart below by moving above the upper
channel shown by red-dashed lines. More
specifically, it must move above the top dashed trend line and close
2-consecutive days above it or close at least 3% above the trend line. If it does, we can rest easier that a re-test
of the low is less likely. The Index tried to breach the upper trend line
Wednesday and failed. I am not too
worried about that, yet; it needed a rest.
CONSUMER PRICES (Briefing.com)
“Consumer prices inched up 0.1% in September after declining 0.2% in August…Core CPI trends remain well below the Fed's inflation target and show no signs of accelerating.” Commentary, Charts and analysis at…
http://www.briefing.com/Investor/Calendars/Economic/Releases/cpi.htm
MARKET REPORT
Wednesday, the S&P 500 was down about 2% to1941 (rounded). There was considerable late day selling and that is a concern.
VIX was up about 11% to 17.87.
The yield on the 10-year Treasury Note was unchanged at 2.22%.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 49.6% at the close Wednesday. (A number below 50% is usually bad news for the markets.) New-highs outpaced New-lows Wednesday. The spread (new-highs minus new-lows) was +73. (It was +52 Tuesday). The 10-day moving average of change in the spread rose to +31. In other words, over the last 10-days, on average, the spread has increased by 31 each day.
Internals switched to neutral on the market, because the %-stocks advancing (Breadth) fell to just below 50%. This is not unexpected since some consolidation is probably good after the big up day we saw Tuesday.
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 long-term NTSM system analysis is now HOLD on the market.
MY INVESTED STOCK POSITION
I moved some funds back into the market on Friday, 17
October 2014 as a trade and increased my position
in stocks from 30% to about 40% overall.
I added more Monday, 20 Oct, to bring my stock investments up to 50%.
This move was based on my comments 16 Oct that a Tradable bottom had been set. Since I am semi-retired, 50% is Fully
invested for me.--INDIVIDUAL STOCKS FROM A VALUE HOUND--
ENSCO (ESV): HOLD
