The S&P has fallen 6.4% from its high about a month ago and is now 6.5% above its 200-day moving average.
I have suggested several times (1 Mar and 10 Mar) that we should expect some quick down moves. It has taken a little longer than expected for that to happen, but here we are. On the good side, down-moves have looked weaker than during last year’s 16% correction so we may find that our first guess of around 10% {or Mr. Stovall’s prediction of 7-11 correction (14 Mar)} may be the right amount. As always, we’ll have to wait and see.
Regarding the VIX, I looked quickly in some of my data during recent corrections to see if I could use the VIX to predict the depth of a correction – off hand I could not find any relationship. My earlier musing about VIX and how far down we might go don’t seem to be supported by the numbers.
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. No surprise, 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 44% as of yesterday. This is a middle of the road value for sentiment. We may not see a %Bulls low enough to call a buy. Sentiment is about the only one of our signals that didn’t call the sell on 22 Feb.
(Sentiment is a reverse indicator; a high %-bulls indicator is bearish for the market and vice versa.)
PRICE: Neutral. The Price analysis indicator has dropped since last week but it is still in neutral territory.
VOLUME: Sell. More volume has been going to the downside. No surprise there.
VIX: Sell. Our VIX indicator is in negative territory. It remains in an uptrend and that is not good for the market. The VIX is rising at a slower pace than it did last year when we had a 16% correction – I think that is good, but, I haven’t checked a lot of data to verify my feelings. (I want numbers showing a relationship - not feelings.)
SUMMARY: The overall Navigate the Stock Market analysis was SELL today, but if you haven’t sold already it is hard to know what to do. The NTSM system calls tops and bottoms – a later buy or sell signal presents the market conditions, not a recommended action. We really don’t know how far the market may fall…or even if it will continue to fall. (See the page How to Use the NTSM System).
I don’t see much chance for a Buy this week, but we could see a quick reversal so stay tuned.
