"The Federal Reserve on Wednesday slashed its forecast for U.S. economic growth this year but expressed confidence the recovery was largely on track and would allow it to begin raising interest rates in 2015. Despite the cut from around 2.9 percent to a range of between 2.1 and 2.3 percent for 2014 growth, the central bank pushed ahead with plans to wind down one of its main stimulus programs by the end of the year, as widely expected. It reduced its monthly asset purchases from $45 billion to $35 billion a month…” Story at…
http://www.reuters.com/article/2014/06/18/us-usa-fed-idUSKBN0ET2CA20140618
At 2PM the S&P 500 shot up 6 pts. so the initial reaction to the Fed
statement was one of relief. The
reduction in QE was widely expected and probably a failure to taper would have
been seen as a negative.
OFF TOPIC – IRAQ (Global Economic Analysis)
“Gen. Odom, a former NSA director, called the Iraq war ‘the
greatest strategic disaster in American history,’ and told the surprised
audience that he could not understand why Congress had not impeached the
president for pushing this disaster on the United States. History continues to
prove the General’s assessment absolutely correct.” Commentary at…
http://globaleconomicanalysis.blogspot.com/2014/06/democrat-quotes-on-iraq-ron-paul-asks.htmlThis was my opinion at the time; Hussein had the Islamic fundamentalists under control. He had to because he was afraid of them. As George Bush’s father (GHW Bush, former CIA Director) knew, taking out Hussein would create a vacuum that could be easily filled by the most violent of the bad actors. I thought, however, that they (the Administration) must know something I didn’t. It didn’t seem possible that they could be that stupid…but they were. Only an arrogant idiot would try to set up a Jeffersonian Democracy in Iraq. Before you conclude I am partisan, let me say that only an arrogant idiot would mismanage healthcare as has Obama and his administration. Enough ranting! These are the 2-worst Presidents of my lifetime!
MARKET REPORT
Wednesday, the S&P 500 was up about 0.2% to 1942 (rounded).
Wednesday was a statistically significant up-day based on my analysis of
price-volume action. This results in a down day the next day (about 62% of the
time) and sometimes indicates a reversal.
VIX fell about 12% to 10.61. This is a level that has preceded pullbacks in
the Index in 2013 and 2014. VIX is not there yet, but VIX below 10 is very
rare. The last time it happened was in
2007 about 8-months before the highs that preceded the crash. In fact, Bob Janjuah, Co-Head of GFI Macro
Strategy at Nomura Securities Co. Ltd., predicted the party would be over when
the VIX dropped below 10.
The yield on the 10-year Treasury Note fell to 2.59% at
the close.
The Bond Ghouls didn’t share the Option and Stock market
optimism about the Fed statement.
RSI
RSI (SMA, 14-day) rose to 73 Wednesday suggesting an
overbought condition and a possible pullback.
Overbought can remain for some time though so the timing of a pullback
is certainly not clear, but another clue is the percent-above-the 200-dMA.
% ABOVE THE 200-dMA
When the S&P 500 index reaches 10%-above the 200dMA
it can be trouble for the markets. That
is about 2% above the present value, so this rally is getting long in the
tooth. The upper trend line is around
1975 – 2000 so the evidence is there for at least a 5% pullback, if the Index gets
there. The timing is not clear since the
trend line slopes upward as does the 200-dMA.
The speed at which the Index climbs will determine when we might see a
pullback and also how high the index can climb before trouble begins. Whether
the S&P 500 will have a correction greater than 5% remains to be seen.
MARKET INTERNALS (NYSE DATA)
Briefing.com hasn’t posted the internals data yet and
that usually means there is a glitch. I
have plugged in values from other sources, but I am not fond of mixing data
sources for the sake of consistency.
Given that caveat, here is the Internals report:
The 10-day moving average of the percentage of stocks
advancing (NYSE) climbed to 58% at the close Wednesday. (A number above 50% for the 10-day average is
generally good news for the market.)
New-highs outpaced New-lows Wednesday. The spread (new-highs minus new-lows) was +176.
(It was +123 Tuesday.) The 10-day moving average of change in the spread rose
to +2. In other words, over the last 10-days, on
average, the spread has INCREASED by 2 each day. The smoothed 10-dMA of up-volume
was UP today and internals switched to positive on the market.
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 analytical model for LONG-TERM MONEY remained HOLD Wednesday. Sentiment fell to 76%-bulls (5-dMA of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim funds at the close on Tuesday. (I’m always a day late on this stat because it isn’t available until later tonight.) This value was 85%-bulls on 19 May. Sentiment, Volume & VIX indicators are all neutral. The Price indicator remains positive because up-moves have been larger than down moves recently.
MY INVESTED POSITION
I increased my stock allocation to 50% invested in stocks
on 26 March because of the NTSM indicators turned positive 24 Mar at the
close. 50% in stocks is fully invested
for me, given my age (semi-retired) and the risk inherent in today’s stock
market. I am watching closely to see if it is time to reduce my long-term stock
holdings.--INDIVIDUAL STOCKS--
ENSCO (ESV): BUY (Earnings announce 28 July)
The chart looks OK with higher lows and it made a higher high on the
1-month chart so I again rate ESV as BUY. It doesn’t hurt that it was upgraded
to Buy on 27 May by The Street.com. For my initial discussion see the NTSM blog at:
http://navigatethestockmarket.blogspot.com/2014/05/coppock-curve-says-stock-crash-nowblow.htmlENSCO benefited from an upgrade of Diamond Offshore 29 May by Morgan Stanley. Morgan Stanley upgraded Diamond Offshore to equal weight. They said, “Our Underweight thesis based on significant negative earnings revisions has largely played out. We also believe that the cycle is turning and that floater availability has peaked.”
TESARO (TSRO): BUY
For my initial discussion see the NTSM blog at:
http://navigatethestockmarket.blogspot.com/2014/05/gdp-contractsjobless-claims.html
[28 May 2014] BMO Capital upgraded Tesaro (NASDAQ: TSRO) from Market Perform to Outperform with a price target of $46.00. Posted at…
http://www.streetinsider.com/Upgrades/BMO+Capital+Upgrades+Tesaro+(TSRO)+to+Outperform/9071511.html
Research has shown that to have a diversified portfolio no one stock should be more than 4% of the portfolio total, or stated another way, if your total portfolio consisted of individual stocks, you would need at least 25-stocks to be “diversified.”
