Big Move today in the Stock Market

Today’s action was OK – big UP days are always better than big DOWN-days.  I would, however, prefer slow and steady up movement rather than a day like today (a big move can sometimes signal a shift in direction), but we’ll take it.

When I look at some of the data I keep, specifically volume/price charts, it looks like we may see some sort of top in the month or months ahead.  That’s not a call that we can trade so we’ll need to see how it plays out.  I am just putting out a caution flag.  In the mean time, I’ll be looking at the daily output of the Navigate the Stock Market numerical model to see if we get a sell. 

“Despite the "lost decade" since the extreme valuations of 2000, valuations are now presently at about the same level from which prior secular bear markets have just started. There is no basis to expect a secular bull until we observe the valuations from which they have invariably started. Meanwhile, the recent cyclical bull market from the 2009 low has already run the same duration and slightly further than the typical cyclical bull in a secular bear. .” - John P. Hussman, Ph.D.,31 May 2011 Weekly Market Comment, http://www.hussmanfunds.com, used with permission.

{Secular trend - a major 15 to 20-year trend.  We are currently in a Bear that has lested more than 10-years.

Cyclical trend - the smaller up and down moves within the secular trend.  We are currently in a cyclical Bull that has lasted roughly 2-yrs.}

The NTSM analysis switched to BUY on 20 April.  Today there is not much change - all indicators are still neutral, so the NTSM analysis is still HOLD.

 I remain 100% long in stocks in the Long-term portfolio and 75% long in the trading portfolio. (See the page How to Use the NTSM System).  That is way too aggressive for most people and I don’t recommend it unless you have a high tolerance for risk.

Navigate the Stock Market - Still a HOLD

As of Friday, all indicators were neutral, so the NTSM analysis is still HOLD. I think we go up from here - at least for a while. 

As they say, trade what you see, not what you think, but I remain 100% long in stocks in the Long-term portfolio and I am 75% long in the trading portfolio. (See the page How to Use the NTSM System).  That is way too aggressive for most people and I don’t recommend it unless you have a high tolerance for risk.

My analysis – the stock market is going higher

We had a low volume day today on the S&P 500 with about 15% less volume than we’ve had over the last month.  This doesn’t really tell us much though.  Low volume is normal after a bottom, because traders don’t know if we’ve really bottomed and are cautions.  Also, low volume could mean there is little interest in buying so the brief rally we’ve had in the past 2-days may not be sustained.  As always, we’ll have to wait and see.

“Is the glass half full, or half empty?
It depends on whether you're pouring, or drinking.” – Bill Cosby

The Navigate the Stock Market analysis is a HOLD again today.  The Navigate the Stock Market analysis switched to BUY on 20 April and has been Hold or Buy since then.

I remain 100% long in stocks in the Long-term portfolio and I 75% long in the trading portfolio. (See the page How to Use the NTSM System).  That is way too aggressive for most people and I don’t recommend it unless you have a high tolerance for risk.

The Wednesday Update of the Navigate the Stock Market System

It looks like Monday was a mini-test of the prior 18 April low of 1305 on the S&P 500.  On 18 April the volume was 4.8 billion shares traded, 127% of its 20-day moving average.  That indicates a degree of panic at that interim low on 18 April.

Monday, we closed at 1317 (about 1% above the 18 April low – I’d prefer to see a close below the previous low) but we got there with only 3.3-billion shares traded, or about 84% of the 20-day moving average of volume.  Market internals improved too. That indicates a degree of comfort with this level on the S&P as of Monday’s close (or at least that selling is drying up), so I would have expected to see upward movement on Tuesday.  We did get it today so some investors/traders agreed with me, even if they were late :>).  I think we continue up from here, though not in a straight line.

The S&P 500 index is now 6% above its 200-day moving average.  At the 18 February Top it was 15.2% above the 200-dMA so that’s a good number.

1.5 billion dollars (net) was pulled from domestic mutual funds in the past week for a total of about 5.7-billion over the past 3-weeks.  That’s no surprise given the recent “turmoil.”

SUMMARY OF NTSM INDICATORS:

As of today’s close, our 4-areas of market analysis present the following picture:

SENTIMENT:  Neutral.  Sentiment was still 55% Bulls as of the close yesterday.  It is high, but not a sell yet. 

PRICE: Neutral. Price action has been more to the upside and this trend is likely to continue.  

VOLUME: Neutral. Volume has been more down than up. 

VIX: Neutral.  VIX was 17.07 today.  You have to go back 2-weeks to get a lower reading.

NTSM is HOLD today, but I think we look pretty good, baring unforeseeable issues. 

The Navigate the Stock Market analysis switched to BUY on 20 April and it is HOLD today                                

I remain 100% long in stocks in the Long-term portfolio and I reset the trading portfolio yesterday to 75% stocks. (See the page How to Use the NTSM System).  That is way too aggressive for most people and I don’t recommend it unless you have a high tolerance for risk.  I am beginning to question my own trades because there are many risks to the market now including debt problems, Greece default problem, political posturing, increasing oil prices, end of QE2…you get the idea.  I really should cut back on the stock % just on general principles.

NTSM Still a Hold

My power was out yesterday due to strong thunderstorms in the area.  Here’s yesterday’s post and a quick update.

Quick update: The NTSM analysis is still hold.  We had low volume on Monday and that may mean the downtrend is close to ending...assuming we don’t have a rash of bad news.

Yesterday’s post:

HERE’S AN IMPORTANT REVIEW OF QE2:

Excerpts on QE2 from an article in Marketwatch by Brett Arends (senior columnist for MarketWatch and a personal-finance columnist for the Wall Street) Journal at.... http://www.marketwatch.com/story/qe2-was-a-bust-2011-05-21   

“QE2 has created a massive new bubble in dollar-based financial assets, from stocks to gold. Meanwhile, it has had zero visible effect on the real economy....

(JOBS) ...The percentage of the population in work is actually lower today — 58.4%, compared to 58.5% last August....

(HOUSING) ...the average price of an “existing” (i.e. used) home was $177,300 in August, just before QE2. Today? It’s $163,700 — or 8% less...

(GROWTH) ...Economic growth has slowed. It was 2.6% last summer. It’s a miserable 1.8% now....

(RETAIL) ...Retailer Gap on Friday became the latest economic bellwether to warn on weak sales and rising costs....

Meanwhile QE2 has created an entirely artificial bubble in all dollar-based assets.

Look at the stock market. Since Aug. 27, when Bernanke unveiled his plan for QE2 in Jackson Hole, Wyo., the S&P 500 has risen by 26%.

So far, so good, right? But it’s an illusion. What’s really happened is a decline in the value of the dollars that the shares are measured in.

Measured in hard currencies, the stock market boom has been much less impressive. In Swiss francs, the S&P has risen by just 8.4% since Aug. 27. In currencies like the Swedish krone and Australian dollars it’s even less. Measured in gold, the S&P 500 is up just 4.5%.

Meanwhile the illusion of a boom is causing all sorts of investors to take crazy risks. Witness LinkedIn’s IPO. Economists from the so-called “Austrian” school say this is a reason to go back to a gold standard. It certainly makes you wonder what’s next.”

HERE IS WHAT I THINK IS NEXT...

A significant drop in the price of stocks (>25%) is coming within a year...we just don’t know exactly when.

Nothing like some bad news to worry the stock market

On Friday, rating agency Fitch cut Greece's credit rating by three levels to "highly speculative," basically junk bond status. In addition, Standard & Poor's cut Italy's outlook to 'negative' from 'stable.'

 f that weren’t enough we read every day that the Fed's quantitative easing program is set to expire in June.  That “news” is so old it really doesn’t matter at this point.

Markets are jittery though, and we broke several trend points so it looks like we are in a down trend. I can’t really tell at this point if the trend is up or down. To manage risk, I sold ½ of my trading positions today (at a 2% loss – ouch, I hate being wrong).  I will zero out the trading portfolio unless we go improve tomorrow. 

NTMS is still Hold and I am cautious at this point. 

 I remain 100% long in stocks in the Long-term portfolio and 40% long in the trading portfolio. (See the page How to Use the NTSM System).  That is way too aggressive for most people (including me) and I don’t recommend it unless you have a high tolerance for risk. 

What’s wrong McFly….Chicken? (a stock market commentary, no doubt)

Sometimes I think we are playing chicken with the stock market.

 CNN/Money.com implied today that the lower gas prices we are now seeing are a bad thing and said, “Sagging economic expectations, after all, are the likeliest route to lower energy costs…There are plenty of signs economic growth is slowing. U.S. gasoline demand has fallen more than 2% over the past year, suggesting that high prices have already started to weigh on the economy…Uber-bear David Rosenberg cites recent declines in architectural billings, small business optimism, house price and manufacturing indexes.”    http://finance.fortune.cnn.com/2011/05/20/do-falling-gas-prices-spell-recession/

 The were some bad retail numbers reported today…"When you see these retailers give numbers like this, you get concerned that the consumer is starting to give up some ground, with high oil prices and all," said Anthony Conroy, head trader at BNY ConvergEX. http://money.cnn.com/2011/05/20/markets/markets_newyork/index.htm?iid=HP_LN

 As I previously noted, Robert Reich economist and former Labor Secretary in the Clinton Administration wrote several weeks ago, “Why aren't Americans being told the truth about the economy? We're heading in the direction of a double dip -- but you'd never know it if you listened to the upbeat messages coming out of Wall Street and Washington.”

 …and yet here we are, fully invested, expecting the stock market to make further gains.  It won’t last forever, but I don’t think we’ve made a top yet.  We’re right back at the lower trend line so we’ll get concerned if we go down further, because it may break the trend.  I still think we are in an upward trend.

 The Navigate the Stock Market analysis switched to BUY on 20 April and it is HOLD today                                

I remain 100% long in stocks in the Long-term portfolio and 80% long in the trading portfolio. (See the page How to Use the NTSM System).  That is way too aggressive for most people and I don’t recommend it unless you have a high tolerance for risk.