Today, Tuesday, the S&P 500 finished up
2.3%.
The VIX indicator in the Navigate the Stock
Market computer analysis switched to “buy” today so the NTSM analysis is now
HOLD overall.
That is a significant development and a bit
of a surprise that can’t be ignored. VIX
is the most reliable indicator for NTSM based on back testing over 5-years of
data.
I have been watching the VIX rise and the VIX
indicator has been negative since last July.
The reversal is caused by a slowing rate of climb of the VIX (identified
by the computer) and that predicts a potential reversal of the NTMS system
overall. There are also other indicators
that seem to show we could be near a bottom.
The NTSM model is not currently a buy, but it
just means I need to change my attitude.
I have been very negative and caught up in the hype of CNBC, recession
forecasts, and the like.
A couple of points:
(1) The
previous high on 29 April was 1364. That
is 19% above yesterday’s close. The
shallowest drop in a bear market was around 19% in the 70’s. In 1932-1934 the decline was 23%, but it only
took 6-months to get there. We are now
in the sixth month since we saw the previous high. So historically, we are within the range of
previous bottoms, but just barely. Most
are longer and deeper.
(2) Breadth
(%-advancing) is near recent historic lows.
(3) Sentiment
has been very low (%-Bulls) since early August and hit some numbers associated
with bottoms last week.
I still want more confirmation. Either a “buy” from NTSM or a low volume
successful test; but, it is important to change one’s thinking in the face of
analytical evidence - in spite of the herd mentality that has been calling for Armageddon
(even from me).
As an excellent trader (DK)
said, “Pioneers take all the arrows, so sit back and let
the institutional investors sort this out. It's a party worth being late to.” (DK Report at http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2287993.)
Conclusion: I’ll be on alert for a potential
reversal to a Buy, but “patience” is the word – I wish I had more...patience
Keep in mind all of this optimism is based on
guessing what may happen. We could also
see more down days ahead without a buy-signal...OR...a buy-signal here might
only be temporary.
Today’s data is all screwed up due to the
wild finish when everyone decided to buy starting at around 3:15 this
afternoon. The S&P 500 was up almost
4% in the last 45-minutes of trading…amazing!
Because of the missing data, I could only infer some numbers in the NTMS
model so I may have to wait till tomorrow to update, but I doubt that it will
switch to buy, even with the right numbers.
For now the NTSM model is HOLD, but we could see a buy in a few days depending on market action.
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).
I went 50% long in the trading portfolio based on the improvement
in the NTSM model and yesterday’s big down day.
