Good day today and the market indicators we track improved.
One cautionary thought: the S&P 500 is now 11.6% above the 200-day moving average. That is approaching the general range where pullbacks may occur. In 2010 the 2-significant pullbacks started after the %-above-200-dMA reached 15% and 12.5%. The catch is that this isn’t a good indicator for trading since it may remain elevated for some time before a pullback occurs and during extreme markets, this indicator can reach extreme values.
We remain in a long-term bear trend so the watch-words are caution and capital preservation.
SUMMARY OF INDICATORS:
As of today’s close, our 4-areas of market analysis present the following picture:
SENTIMENT: Neutral. %-bulls indicator is 51%. This is an elevated number, but not enough to issue a sell signal. Sentiment bottomed at 16% last July. Surprisingly, that is about ½ of the %-bull value that occurred after the 677 closing low in Mar of 2009. The extremely low sentiment value is one reason we have moved steadily up since the S&P 1023 low in the summer of 2010. (Sentiment is a reverse indicator; a high %-bulls indicator is bearish for the market and vice versa.)
PRICE: Buy. Price action has been positive since late November.
VOLUME: Neutral. While volume is neutral, we have seen more volume to the up side than down since late November, so this is positive for the market. I’d like to see stronger up-volume to get this indicator into the BUY range.
VIX: Buy. The VIX has been consistently falling and that is positive for the market.
The overall indicators are BUY. This is the first buy rating we’ve had in the last 3-weeks of trading. Previously, they were HOLD.
The indicators can turn quickly and I’ll post any changes. If there are no changes in the overall rating, normally I’ll post weekly after the Wednesday close.
MY INVESTED POSITION: I remain 100% invested in retirement funds and about 15% long in the trading account. This is an absurdly aggressive position (for an old guy) and I don’t recommend it unless you have an extremely high tolerance for risk.
NOTE: The market indicators are not designed for frequent trading. Last year we had 2-sell signals and 2-buy signals. In 2010, the system was up 36% vs. the S&P gain of 14%.
I’ll post more information on the system in the future, especially some data on backtesting.
