The Navigate the Stock Market analysis (NTSM) called a SELL on the S&P 500 on 22 February 2011. That was the first change since the 2 July 2010 buy-signal.
Since then we have bounced between a HOLD and SELL. Today we had another SELL signal.
SUMMARY OF NTSM INDICATORS:
As of today’s close, our 4-areas of market analysis present the following picture:
SENTIMENT: Neutral. %-bulls indicator is now 52%. This is a middle of the road value for sentiment. (Sentiment is a reverse indicator; a high %-bulls indicator is bearish for the market and vice versa.)
PRICE: Sell. The NTMS has recorded a clear deceleration in upside moves since the end of January and it got worse today…even though the S&P went up 2pts.
VOLUME: Sell. More volume has been going to the downside…this indicator has been negative since the S&P topped.
VIX: Neutral. Our VIX indicator is in neutral territory. It is not a bad enough number to call a Sell; but it is still on the negative side of the fence since it has been rising overall since the middle of February.
The overall status for the Navigate the Stock Market system is SELL. (Our indicators are based on closing data so we generally wait until after the market close to update the system.)
RECENT CORRECTION HISTORY: During the 2-corrections over the last year, the time from the high on the S&P 500 to the low varied from 24-days to 62-days. We had a “fake-out move” in Nov of 2010 that lasted 12 days from high to low, but our system didn’t call a sell in that case and I stayed fully invested. Unless this is another fake-out, we should have at least a couple more weeks of choppy down moves ahead.
Since the NTSM analysis could always be wrong, I am watching the volume of shares traded on the NYSE and the Market Internals. Classical technical analysis says a Bottom will be signaled when the market makes a “successful test” of the previous low. That happens when the S&P hits a value a little lower than the previous low on “lower volume and improving market internals”. I may get back in the market based on that analysis rather than waiting for the NTSM system to make the call. The decision will be based on the status of NTMS indicators at the time of the lower low.
MY INVESTED POSITION: I moved to an all cash position in retirement funds on 23 February and that makes my overall stock position about 30%.
Further, I took a 50% position in the Rydex Inverse Nazdaq 100 2x Strategy fund in my trading account. This fund is a “bear” fund that doubles the inverse of the Nazdaq 100. That means that it will go up twice as fast as the Naz 100 goes down…and vice versa. (If I am wrong I’ll lose money twice as fast!)
This moves me to a conservative position in terms of stock exposure; hedges some investments; and reduces overall risk considerably.
REPEATING MY COMMENT FROM LAST WEEK: I am a little concerned that it has been about 4.2 years since the previous high on the S&P. When we look at the 1966-Bear Market, a drop of about 25% in market prices (a 50% retracement) started at about the same 4.2 year point. The difference is that in the 1966-Bear, the Dow made it back to the old high, so that comparison may not be warranted here. (See the Page link at the side of this blog page, titled; “Compare 1966 Bear Market to the Current Bear Market.” The major concern is oil price. If the oil price remains at the current high level for too long we will likely see a significant drop in the markets.
