“Ultralow borrowing costs. Pent-up demand. Aging infrastructure. Record consumer wealth levels. JPMorgan Chase's Tom Lee has a long list of reasons to remain bullish on stocks this year. "To me it's really a formula for stocks to do quite well because it's going to be a story about earnings surprise for the next few years," Lee said Monday on "Squawk on the Street." Story and video at...
http://www.cnbc.com/id/101440520
CONSUMER CONFIDENCE (Briefing.com)
”Consumer confidence improved in January. The Conference
Board’s Consumer Confidence Index increased to 80.7 from a downwardly revised
77.5 (from 78.1) in December. The Briefing.com consensus pegged the Consumer
Confidence Index at 77.5…Consumption is reliant upon income, not sentiment. As
long as the labor situation improves, consumption growth will follow.” Summary
and charts at…http://www.briefing.com/Investor/Calendars/Economic/Releases/conf.htm
MARKET REPORT
Tuesday, the S&P 500 was down 0.1 % to 1845 (rounded). There was late day selling again today, suggesting
the Pros are unsettled.
VIX was down about 4% to 13.67 and that suggests the
options players didn’t agree that stocks should be down.
The yield on the 10-year Treasury Note fell to 2.70%
indicating bond buying overall.
The markets seem to be drifting. I don’t see much in the indicators that say up
or down, so for now it’s in a holding pattern.
The biggest worry is the chart of the Index that has stalled around 1848. If the S&P 500 index can’t get above the
old 1848 high, the most likely direction is down. RSI says the same.
The 14-day RSI is very high at 86 and it suggesting a short-term
top. (“…the Relative
Strength Index (RSI) is a momentum oscillator that measures the speed and
change of price movements. RSI oscillates between zero and 100…RSI is
considered overbought when above 70 and oversold when below 30. More at…http://stockcharts.com/help/doku.php?id=chart_school:technical_indicators:relative_strength_in )
RSI can remain overbought for some time, but a triple top
is a bearish technical chart formation.
The S&P 500 needs to break to upside soon, or we should expect a
reversal.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing fell to 61%
at the close. (A number above 50% for
the 10-day average is generally good news for the market.) New-highs outpaced new-lows Tuesday, leaving
the spread (new-highs minus new-lows) at +108. (It was +230 Monday). The 10-day moving
average of change in the spread was +6. In other words, over the last 10-days,
on average, the spread has increased by 6 each day. Up volume fell again on the
day, and the 10-dMA 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. 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, Tuesday. 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.
MY INVESTED POSITION
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.
