“The number of Americans filing new claims for unemployment aid inched up last week but remained near a seven-year low, a sign of strength for the job market. Initial claims for unemployment benefits, a reading that helps gauge the number of newly laid-off workers, rose by 8,000 to a seasonally adjusted 312,000 in the week ended May 31…economists surveyed by The Wall Street Journal expect the Labor Department will report a net gain of 210,000 jobs in May, less than 288,000 added in April but still a solid gain.” Story at…
http://online.wsj.com/articles/u-s-jobless-claims-rise-to-312-000-in-week-ended-may-31-1401971521
FORGET ZIRP, EUROPE
GOES FOR NIRP (CNBC)
“The European Central Bank (ECB) took the unprecedented
step Thursday by imposing a negative interest rate on banks for their
deposits—in effect charging lenders to park money with it.” Story at
http://www.cnbc.com/id/101733784
BREAKING THE 2014 TREND
The S&P 500 is trying to convincingly break the upper trend-line
shown red in the chart below. That is
the trend that has been in place since the New Year. The top of the lower trend
was around 1915. As of today, the Index
is 1% above the old trend. I’d prefer to
see it close 3% above the old trend but it has closed above the old trend line
at least twice. Many would conclude that
the old trend is gone and that should allow the Index to go to the upper trend
line. It looks like the Index can move
higher.
WHERE’S THAT CORRECTION?
The 200-dMA is now 1800, about 7% below the current S&P 500
value. A correction now, if it were to
occur, might not be much. Still, a correction this year is nearly certain based
on mid-term, off-Presidential election year history.
THIS YEAR IS A MID-TERM, OFF-PRESIDENTIAL ELECTION YEAR
Corrections have occurred in each of the last 13-mid-term off
presidential election years. The average
drop has been 23% and (time wise) the “average” bottom was achieved at the end
of July. 7 have bottomed in the months
June thru September. Only 2 of those 13
corrections bottomed before 1 June.
FEAR ALMOST NON-EXISTENT (d.Short.com)
“The VIX clearly shows investor concern about key stock
indices declining, sitting close to the same point it was at back in 2007—just
a few months before stocks started to collapse. Aside from the VIX flashing red
... there are two other key stock market indicators in the trouble zone. According
to the CNBC Market Insider Activity, insiders of companies on the key stock
indices continue to sell billions of dollars worth of stock monthly…And
corporate earnings of companies in key stock indices are flashing warning signs
as well… From what I see, the upside is very limited; investors shouldn't be
looking to buy when the fear of stocks going down is almost non-existent, but
corporate insiders are dumping their stock and revenue growth is nowhere to be
found.” – Michael Lombardi commentary guest at Advisor Perspectives at…http://www.advisorperspectives.com/dshort/guest/Michael-Lombardi-140605-VIX-Update.php
MARKET REPORT
Thursday, the S&P 500 was up about 0.7% to 1940 (rounded).
VIX rose about 3% to 11.68. VIX remains at a point that
has recently aligned with the start of corrections.
The yield on the 10-year Treasury Note fell slightly to 2.58%
at the close.
The Bond Ghouls remain worried.
Thursday was a statistically significant up-day since it
exceeded my price and volume statistical parameters. This would usually (about 62% of the time) be
followed by a down day on Friday.
RELATIVE STRENGTH INDEX (RSI)
RSI kicked in at a high 85 Thursday suggesting an
overbought condition. Overbought
conditions can persist, but many put great faith in RSI.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing on the NYSE
rose to 59% at the close Thursday. (A
number above 50% for the 10-day average is generally good news for the market.)
New-highs outpaced New-lows Thursday.
The spread (new-highs minus new-lows) was +193. (It was +152 Wednesday.)
The 10-day moving average of change in the spread was +14. In other words, over the last 10-days, on
average, the spread has INCREASED by 14 each day. The smoothed 10-dMA of up-volume
was UP today and internals are 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 Thursday. Sentiment rose to 74%-bulls
(5-dMA of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim
funds at the close on Wednesday. Amateur traders are becoming more bullish, but
this value was 85%-bulls on 19 May. Sentiment, Price, Volume & VIX
indicators all remain neutral.
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
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.html
ENSCO 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.”
