“Initial jobless claims unexpectedly spiked to 348,000
for the week ending January 25 from an upwardly revised 329,000 (from 326,000)
for the week ending January 18. The Briefing.com consensus expected the initial
claims level to fall to 325,000.” Story and graphs at…
http://www.briefing.com/Investor/Calendars/Economic/Releases/claims.htm
STOCKS SLAMMED! OFFICIAL CORRECTION LOOMS (Yahoo Finance)http://www.briefing.com/Investor/Calendars/Economic/Releases/claims.htm
“Emotions are high and people are scared,” says Jeff Kilburg
of KKM Financial in the attached clip. “If
you’ve been part of this long, profitable, QE and Ben Bernanke sponsored rally,
I think it’s time to start thinking about what profits you should book."
Video and story at…
IS THE CORRECTION OVER? LOOKING FOR CLUES (Lance Roberts posted to Advisor Perspectives)
Here is a good discussion of some of the technical issues associated with calling a bottom. It deals with Bollinger Bands that are based on statistical analysis of S&P 500 moving averages. It is geeky, but not too geeky, and I recommend the read. It’s too long to summarize, but here are a couple of points:
“It is very likely that the recent selloff has reached a short term bottom. A rally back to the 50-dMA [1812], or an attempt at previous market highs, is entirely possible…There is one thing that is crucially important to remember - "we are all guessing." While there are plenty of individuals currently prognosticating that the current bull market is still intact, and could indeed be proven right, they are only making an educated guess. However, it is also important to remember that most of these individuals on television have an inherent bias to sell you some product or service which keeps your money invested at all times for a fee.” Commentary at D.short.com at…
MORE CORRECTION TALK
-The S&P 500 tested the December low of 1775 on Wednesday. Volumes were higher Wednesday so there is
more fear now than there was at the low on 13 December. VIX was only 15.75 at the December low vs.
17.26 on Wednesday. I would consider Wednesday
a failed test, but the markets bounced up on Thursday anyway. The market will need to retest 1775 on lower
volume before it might begin to suggest an end to the correction. More likely, it will break thru 1775 and head
down. A major point of hope for the
bulls is the 200-dMA, now at 1706. That
is only 4% above today’s close. Further
down, the 8 October low on the S&P 500 was 1655 and that is a significant
technical area of support. Goldman Sachs
called for a 10% correction and that would put the S&P 500 at about 1665.
-VIX is at a critical level. If one were to draw a downward sloping line connecting the
highs in VIX from June of 2012 until today, today’s value of VIX (18.39) would
be on that line. If VIX increases from here it breaks that 18-month long downward
trend line. Trends often go on for some
time so this could (emphasis on “could”) be a harbinger of bad news ahead. It might just reverse downward.
-Today’s down-day was on volume 37% higher than the average for the
month on the NYSE so it looks like the beginnings of real fear.
Bottom line: Today, no signs of a correction end.
MARKET REPORT
Friday, the S&P 500 was down 0.7% to 1783 (rounded).
VIX was up about 6% to 18.41.
The 10-year Treasury Note yield fell to 2.64%. Rates at
3% or above are considered by some traders to be “trouble-for-stocks”, but now
rates are falling because of a flight to safety. As bond-prices rise, yields fall.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing fell to 46%
at the close. (A number below 50% for
the 10-day average is generally bad news for the market.) New-lows outpaced new-highs Friday, leaving
the spread (new-hi minus new-low) at minus 26. (It was +29 Thursday). The 10-day moving
average of change in the spread rose slightly to minus 19. In other words, over
the last 10-days, on average, the spread has decreased by 19 each day.
Market Internals are a decent trend-following analysis of
current market action, but should not be used alone for short term trading. (Internals are most useful when they diverge from the direction of the Index; this can sometimes indicate a trend reversal.) In
2013, using these internals alone would have made a 16% return vs. 30% for the
S&P 500 (in on Positive out on Negative – no shorting). Of course, few trend-following systems will
do well in an extreme low-volatility, straight-up year.
NTSM
The NTSM system remained SELL today.
The four areas of analysis, Sentiment, Price, Volume and
VIX are currently rated as follows:
-Sentiment is negative at 78%-bulls, down 5% from its
peak. 78%-bulls means that nearly 4 out
of every 5 investors are betting long in the Rydex Guggenheim long/short funds
I track. Incredible!
-VIX (tracking direction and intensity of VIX) and Volume
are negative (This is a variant of on-balance-volume.)
-Price (calculates and compares the size of up and down
moves) is neutral. There are also a
number of indicators designed to identify tops and bottoms such as the
statistical analysis “panic-indicator” that flashed sell a week ago.
MY INVESTED POSITION
I am about 30% invested in stocks as of 20 December
(S&P 500-1540) because I upped my stock holdings by 10% on the 20th
of December. 30% is a reasonable level
of stock holdings for a correction, so I don’t need to reduce holdings since I
don’t think this will be a major crash.
Even if a surprise collapse did take the stock market down by 50%, I’d
only lose 15% in the stock portfolio. On
the other hand, if I am wrong, leaving 30% invested in stocks hedges the bet
since no system is perfect.
