"Historically, the statistical or mathematical properties of the financial markets have shifted as the economic recovery nears full employment (i.e., at about the 5% unemployment rate the contemporary recovery has reached). Traditionally, at this point in the recovery, the stock market suffers more frequent declines, bond yields rise more often, average annualized returns from both asset classes are lower, diversification benefits tend to diminish, and recession risk is enhanced." - Jim Paulsen, Phd, Chief Investment Strategist, Wells Capital Management. Commentary at…
http://streettalklive.com/index.php/blog.html?id=2971
MARKET REPORT / ANALYSIS
-Wednesday, the S&P 500 was down about 0.3% to 2075 at the close.
-VIX was up about 5% to 16.06.
-The yield on the 10-year Treasury rose to 2.34% after the close yesterday, but bond markets were closed today.
Sentiment has climbed back to 77%-bulls {on a 5-dMA basis, Sentiment = bulls/(bulls+bears)} and that means that 3 out of every 4-traders are betting long in the Rydex/Guggenheim, long/short funds I track. That is very high, but it has been higher. Sentiment peaked at 85%-bulls on the 1st of July with the S&P 500 at 2077. Sentiment peaked 28-days AFTER the all-time high, but that is typical of sentiment. It usually peaks after the top as dip-buyers move in. The 85%-bulls sentiment value is a multiple of standard deviations from the mean that matches the multiple at the extreme low in 2002. (The funds I am using were not around at the high in year 2000 and the Sentiment did not get this high in 2007 because the 2007 crash was not a valuation crash. FYI, the Sentiment was 15%-bulls at the 2002 bottom.)
I point this out, because the extreme sentiment value in July 2015 is rare; it has only occurred once since the 2009 low. It is quite possible that this has signaled the all-time high on the S&P 500 and a bear market is lurking, but a bear market can be avoided with some good news. If we get better news, the markets should react with better performance from small and mid-cap stocks; improved new-hi/new-low data and better breadth just to name a few internals we can track. Still, the S&P 500 has dropped to 0.5% above its 200-dMA.
It will be important to see if the Index can hold above the 200-dMA. My longer term guess is that the market moves down over the next couple of weeks, but perhaps not more than 5-8%; but…
…this is a high risk period for the stock markets. I think it will take better earnings and revenue numbers to get this market settled. Currently, analysts are predicting improved numbers for Q4 of 2015; that prediction must come true. Absent better numbers, a big drop in price is the most likely course for the Index.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 48% Wednesday vs. 51.6% Tuesday. (A number below 50% is usually BAD news for the markets. On a longer term, the 150-day moving average of advancing stocks slipped to 49.2%. (Lowry Research considers the 150-day advance decline time frame to be a critical measure of longer-term, market health.) The McClellan Oscillator (a Breadth measure) remained negative Wednesday.
New-lows outpaced New-highs Wednesday. The spread (new-highs minus new-lows) was minus-56. (It was -55 Tuesday.) The 10-day moving average of the change in spread was -11 Wednesday. In other words, over the last 10-days, on average; the spread has decreased by 11 each day. The internals switched to negative on the markets.
NTSM
Wednesday, the NTSM long term indicator was BUY. Price and VIX indicators are positive. Volume and Sentiment are neutral, but Sentiment remains very high. I am not following this guidance for the time being; I am waiting for a better entry point. I am getting tired of repeating this, but a pullback may be in the works.
I will wait
before increasing stock holdings; I think there will be a better entry point.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
All cash: G-Fund (Cash, risk-free yielding 2.1% over the last 12-months): 100%
For my reasons (or lack of reason) see “My Invested Stock Position” in my prior
blog at...
http://navigatethestockmarket.blogspot.com/2015/11/factset-earnings-cass-freight-index.html
