Monday, June 13, 2016

Don’t Get Eaten by the Wolf … Why Soros is a Bear … Stock market Analysis

“It has now been more than 12 months since the market made a new high. According to the Stock Trader's Almanac, there have only been three times in history when the S&P 500 has avoided an all-out bear market, as compared to the nine times it has crashed, following a full year of nothingness…we're still living in a larger bear market with the bounce since February representing a bear-market rally. Like Little Red Riding Hood, I would steer clear of the stock market for now.” Story at…
WHY GEORGE SOROS IS A BEAR (Jesse Felder’s Tumblr)
“…he believes that the central bank has now made what could be the single greatest mistake in its history. 7 years of ZIRP (zero percent interest rate policy) have led investors to do “crazy things” yet again, like push the valuations of stocks, bonds and all sorts of other asset classes to rare extremes.”

Commentary and Chart from…
-Monday, the S&P 500 was down about 0.8% 2079.
-VIX was up about 23% to 20.97 at the close. (That’s nearly 40% in 2-days suggesting big worries by the Options Boys.)
-The yield on the 10-year Treasury dropped to 1.62%. (6-months ago the 10-year was pushing 2.3%. That’s sign of worry by the Bond Ghouls.)
The S&P 500 closed at its low for the day and closing Tick was an impressively bearish -766.
The 200-day moving average (200-dMA) of the S&P 500 is now 2015 (as a simple moving average), 3.2% above the 200-dMA. It seems likely that the Index will fall at least to that level before this pullback ends.

Stocks on the NYSE have cleared their overbought values. It’s not unusual to clear overbought conditions quickly and it really doesn’t say much about the future. The Index already made solid overbought indications (Bollinger Bands, RSI & Overbought/Oversold Ratio) and that usually means downward action is expected.
Late-day action on the S&P 500 continues to suggest the Smart Money has been selling since late day action has been down 8 out of 10-days. As noted above, Closing Tick (measuring the last trades of the day) was a very low minus-766.
All in all, I think the selling will generally continue with a target of around 2015 (the current value of the 200-dMA); then we’ll see.
My short-term Money Trend indicator can be volatile, but it fell again Monday, and that’s bearish.  I continue to hold short positions mostly in SH and some in QID in the trading portfolio only.
The 10-day moving average of the percentage of stocks advancing (NYSE) dropped to 52.4% Monday. It was 56.2% Friday. A number above 50% is usually GOOD news for the markets, but now it is falling rapidly.
On a longer term, the 150-day moving average of advancing stocks slipped to 51.7%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) dropped sharply, and remained negative.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) was +74 Monday. (It was +126 Friday).  The 10-day moving average of the change in spread slipped to +1. In other words, over the last 10-days, on average; the spread has increased by 1 each day. Market Internals remained neutral on the market.

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 2014, using these internals alone would have made a 9% return vs. 13% 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, nearly straight-up year like 2014.
Monday, the Volume & Sentiment indicators were neutral; the Price indicator (measuring the size of up vs down moves) was positive; the VIX indicator switched to negative. The long-term NTSM indicator remained HOLD.

On 30 Dec I reduced my invested position in my retirement account to 30% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP) and on 15 Jan I reduced stock allocation to zero in long-term accounts. If the S&P 500 index can stay above 2110, I plan to add to my stock allocation.
The S&P 500 peaked in Mid-May 2015 and has not been able to break higher in the past 12-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…