“U.S. consumer prices unexpectedly fell in August as gasoline prices resumed their decline and a strong dollar curbed the cost of other goods, pointing to tame inflation that complicates the Federal Reserve's decision whether to hike interest rates. The Labor Department said on Wednesday its Consumer Price Index slipped 0.1 percent, the first drop since January…” Story at…
http://www.reuters.com/article/2015/09/16/us-usa-economy-idUSKCN0RG1NB20150916
CRUDE INVENTORY (24/7 Wall street)
“U.S. commercial crude inventories decreased by 2.1 million barrels last week, maintaining a total U.S. commercial crude inventory of 455.9 million barrels. The commercial crude inventory remains near levels not seen at this time of year in at least the past 80 years.” Story at…
http://247wallst.com/energy-economy/2015/09/16/crude-oil-price-dips-on-jump-in-gasoline-inventories/
MARKET REPORT / ANALYSIS
-Wednesday, the S&P 500 was up about 0.9% to 1995 at the close.
-VIX fell about 5% to 21.35.
-The yield on the 10-year Treasury rose to 2.28%.
The S&P 500 has climbed back nearly to the 50% retracement level (halfway between the all-time high and the August low) of 1999 and that’s about where a bounce would be expected to fail. I’ll just have to watch and see.
VIX is now down to 21.35. It is a fair question to compare its current value to prior corrections. In 2012, VIX didn’t get this low until after the correction had tested its low and was moving up. In the 2010 correction, VIX dropped to 23.95 at the top of the first bounce. That’s about where I think the S&P 500 Index is now, just based on a likely 50% retracement. It can go higher of course, there are all kinds of Fibonnacci numbers used, but 50% retracement is as good a guess as any. Today’s VIX is about 10% lower than the VIX at a similar point of the 2010 correction, so VIX does not allow a confident prediction that the correction is over.
Sentiment remains high measured with Rydex/Guggenheim long/short mutual funds. As of Tuesday, 81-days after the all-time high on the S&P 500, my sentiment value was 61%-bulls (bulls/{bulls+bears}) on a 5-dMA basis. In the 2011 correction, the Sentiment was 25%-bulls after 81-days after the high.
The lack of fear is surprising. 3 out of 4 investors were bears at this time in the 2011 correction. If we see some bad news this time around, the Index will fall rapidly since investors continue to bet on good news. Looking at the 10% correction in 2012, Sentiment fell to 40%-bulls before the low.
Bottom line: it looks like Sentiment remains too high. One would think that sentiment should turn negative (less than 50%-bulls) before this correction ends.
The most likely scenario remains that the S&P 500 will retest the 1868 low – no guarantees of course.
The average length of corrections (top to bottom) since 1946 has been about 97-trading days. The average correction time since 2009 (corrections greater than 10%) has been 66-trading days, but there have only been three. The current correction is 81 trading-days since the top; but, it is possible that we have already seen the low on 25 August (although that is not the mostly scenario). In that case, the correction ended after 66-days.
The Death Cross remains in effect since the 50-dMA is below the 200-dMA for the S&P 500. This is a long term signal for many. In 2011, the Death cross occurred about 7% before the low. In 2010, the Death Cross first occurred at the low so it was not a good signal then.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) bounced up to 55% Wednesday vs. 49% Tuesday. (A number above 50% is usually GOOD news for the markets. On a longer term, the 50-day moving average of advancing stock was 48.5% and that’s remains a negative.
Again, New-lows outpaced New-highs Wednesday. The spread (new-highs minus new-lows) was minus-19. (It was -61 Tuesday.) The 10-day moving average of change in the spread rose to +7 Wednesday. In other words, over the last 10-days, on average; the spread has INCREASED by 7 each day. The internals switched to positive on the markets.
NTSM
Wednesday, the NTSM long term indicator was HOLD. The Volume indicator is positive. Sentiment and Price indicators are neutral. VIX is negative.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATIONG-Fund (Cash, risk-free yielding 2.1% over the last 12-months): 70%
C-Fund (S&P 500): 15%
I-Fund (EFA): 15%
This is a conservative allocation. The number one priority now is return of capital; not return on capital.
When I do move back into stocks, I will initially invest a high percentage into stocks and phase back if the Index gets to prior highs.
