The
news seems really terrible. Greece, US
debt, Unemployment, Housing…take your pick.
In spite of all the angst, the market is going up.
One reason may be breadth. Breadth simply measures advancing vs. declining stocks and is one of the more important market internals. It can be reported as a ratio or even a difference between advancers and decliners.
I
prefer to look at breadth in terms of the %-of stocks advancing on any given
day. To smooth the data I look at moving
averages. When the S&P made the low
of 1119 on 8 August, the breadth (or %-advancing stocks) equaled the value when
the S&P made its the low last July.
I looked back and checked the breadth in March of 2009 at the 679
closing low. Surprisingly, by several
measures, breadth was lower last month (at the 1119 low) than it was at the
crash bottom of 2009. So we saw real
panic in August, as we previously noted; but we also saw Breadth hit
drastically low levels. To many, that is
reason to buy.
Bottom
line…the bounce we have seen since 8 August is a technically driven rally and
in the absence of even worse news (i.e. a Greek outright default) it could continue.
The
Navigate the Stock Market analysis is now being held in the Hold (or no-change)
mode because the VIX indicator is still quite negative. If the options folks change their minds, our
VIX indicator could move quickly to Buy and that would make the NTSM a Buy overall. Needless to say, we could just as easily see
big declines with more bad news. In the
mean time…
I
will stay out of the market with long-term money.
In
the trading portfolio I’ll try to identify a short term top to re-short.
The
NTSM analysis is HOLD once again.
I sold on the 27 July sell signal at S&P 500 1301 and I am
defensively positioned with only a small amount of my portfolio invested in
stocks. (Zero stocks in the 401k.) (See the page “How to
Use the NTSM System” – the link is on the right side of this page).
