I noticed on one of the day-trader discussion boards today that someone was recommending a sell because the S&P was 12.5% above the 200-day moving average and this, according to the poster, indicated tops from 2003-2011. While we did start the most recent correction in 2010 when the stat hit 12.5%, this is far from a reliable indicator. The stat peaked at 19% in October 2009, months before any meaningful downturn, and hit 15% in Jan 2010 before we had a pullback. It’s hard to draw any conclusion from this one piece of data. It is worth watching, but I don’t think we have topped yet.
We have a rather unique market where retail investors are starting to return. The Investment Company Institute reported $6.5-billion flowed into equity funds in the week ending 12 Jan and $4.6-billion for the week ending 19 January so we may see some unusual bullish data as investors who are late to the party pile in. When they all jump in…that will be the top (sad to say).
SUMMARY OF INDICATORS:
As of today’s close, our 4-areas of market analysis present the following picture:
SENTIMENT: Neutral. %-bulls indicator is 55%. This is an elevated number, but not enough to issue a sell signal. (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 November.
VOLUME: Neutral. The volume indicator has moved up with the up-trending S&P, but it is still in neutral territory. We still need to see stronger up-volume vs. down volume to get this indicator into the BUY range. It is still in positive territory though and that is good.
VIX: Buy. VIX moved to a Buy position based on the drop in VIX yesterday and remains a Buy today.
The overall status for the Navigate the Stock Market system is BUY. (Our indicators are based on closing data so we generally wait until after the market close to update the system.)
MY INVESTED POSITION: I remain 100% invested in retirement funds and all cash 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.
