“At this writing these eight Companies are now "Un-Favorable" and are suggesting that the very old Bull General Market is deteriorating. It is always a slow process of topping that requires much patience and discipline… Just for the record, it will only take a few more Companies to turn Bearish…” Stephen Bauer. Full commentary posted at Advisor Perspectives, dSort.com at…
http://advisorperspectives.com/dshort/guest/Steven-Bauer-140226-Dow-30.php
Stephen Bauer says a simple way to detect market turns is to watch the Dow 30 and the performance of the 30 individual companies. While I track breadth on the NYSE, this could be a better method since the Dow 30 should be the stronger and higher quality stocks.
SUCKERS RALLY NEARING AN END (Profit Confidential)
“Going into 2014, we saw production in the U.S. economy
decline; consumer spending is pulling back, unemployment is still an issue, and
the global economy is slowing. U.S. GDP is far from growing at the rate it did
after the Credit Crisis. …Do investors really think that the central bank will
be able to completely pull back on its quantitative easing program (which is
scheduled to happen in 2014) and that key stock indices will continue to rise?
With the yield on the 10-year U.S. Treasury up a whopping 88% since July 2012,
there are too many factors and indicators working against the continued rally
in key stock indices. The sucker’s rally in stocks is near its end.” – Michael Lombardi,
MBA, published at Profit Confidential at… http://www.profitconfidential.com/stock-market/stock-prices-u-s-gdp-historic-relationship-turns-bearish/2014 CHALLENGING YEAR (Bob Janjuah Blog)
“2014 is already proving to be more challenging, more volatile, more illiquid and more bearish than the significantly bullish positioning and sentiment indicators warranted as we came into this year, and way more bearish than the enormously bullish consensus emanating from the sell-side…I think the end of the post-2009 QE-driven bull is at hand (or very soon to be at hand) and the onset of the next significant (post-QE) deflationary bear market, which I think will run deep into 2015, should now begin to guide all investment decisions.” Bob Janjuah, Co-Head of GFI Macro Strategy at Nomura Securities Co. Ltd. Commentary at…http://bobjanjuah.blogspot.com/
None of the above are predicting a collapse today, though
the comments are cautionary. There’s a
lot of economic information coming out Thursday and Friday, so stay tuned, it
may send the markets up or down dramatically.
MARKET REPORT
Wednesday, the S&P 500 was unchanged at 1845 (rounded). There was late day selling again today, emphasizing
that Pros remain unsettled.
VIX was up about 5% to 14.35 and that suggests the
options players are concerned, but at 14.35, VIX is not all that high overall.
The yield on the 10-year Treasury Note rose to 2.75%
indicating bond selling. Yield has fallen for most of 2014 so the bond market is
confirming that stocks remain under pressure.
The market has again failed to push above the old high. The 14-day RSI (mentioned yesterday) remains
high and VIX rose 4% on a day the S&P 5000 was flat. As Guy Adami (CNBC
Fast Money) said, “I am not a believer in this market…” for the short term. There was, however, some good technical news
today. Advancing stocks outpaced
decliners with 61% of stocks advanced today and that is a big number for no-change
in the S&P 500 index. It suggests
Thursday will be up since the Index usually catches up to breadth if there is an
imbalance.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing fell to 59%
at the close. (A number above 50% for
the 10-day average is generally good news for the market.) New-highs outpaced new-lows Wednesday, leaving
the spread (new-highs minus new-lows) at +146. (It was +108 Tuesday). The 10-day moving
average of change in the spread was +7. In other words, over the last 10-days,
on average, the spread has increased by 7 each day. 10-dMA of up-volume is now
falling so I judge internals to be neutral due to falling up-volume.
New-high/new-low stats are continuing to stall. This can indicate a coming reversal (or
not). It doesn’t always work out that
way. Deteriorating internals at the
new-high is not encouraging, but it doesn’t guarantee the market will fail
here. We saw about a 3% gain in November
2013 on falling market internal stats.
Market Internals are a decent trend-following analysis of
current market action, but should not be used alone for short term trading.
They are usually right, but they are often late. They are most useful when they diverge from
the Index. 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 like 2013.
NTSM
The NTSM system remained HOLD today, Wednesday. The first Sell signal of this cycle was just
over 2-weeks ago on 24 January. As noted before, I expect we’ll either get a
buy soon, if the market climbs much higher, or market internals will lead the
index down.
All NTSM indicators
are now neutral. The 5-10-20 Timer
remains neutral as do the Market Internals.
I am about 40% invested in stocks because I upped my stock holdings by 10% on 12 February (S&P 500-1819) based on Market Internal signals. This is a conservative allocation, but putting a bit more into stocks recognizes that the market internals are improving on the S&P 500 and the “correction” may once again confound the bears. Can you say March? I’ll reassess at the end of the month and add more or pull some out depending on indicators. The end of the month is Friday so I’ll have to make a decision by then to game the 401k rules.
