“[Golman Sachs]…boosted its S&P 500 year-end price
target to 2050 from 1900. Such a rally would represent a 4.2% gain from
Friday’s close on top of the 6.5% gain the S&P 500 has already achieved
this year…’We expect the equity rally will continue, but the trajectory will be
shallow,’ Goldman strategist David Kostin wrote to clients. ‘Domestic economic
growth is accelerating, and earnings will continue to rise, but further P/E
multiple expansion is unlikely given our and the market’s expectation for a Fed
hike within 12 months.’” Steven Russolillo. Story at…
http://blogs.wsj.com/moneybeat/2014/07/14/goldman-goes-from-bear-to-bull-on-u-s-stocks/?mod=yahoo_hs
10% CORRECTION AND RECOVERY PRECEDES A FULL ON BEAR
(Trader Discussion Board)
“Every bear market, other than 1998, and that was
short and sweet, start with a 10% correction followed by a volatile rally that
retests or exceeds the previous high.
-1987 Aug 25 top, 10% drop into mid sept, then back to new highs on qqq (even
if there wasnt one, appl made a new high, same for msft, market leaders at the
time) and almost new high on dow on oct 1\6, then a 11 day drop of 35%.
-1990 had a 10% drop in Jan, then a rally to new highs into July, although was
up and down and all over the place to get there.
-2000, 2007, all had 10% drops and then new highs, but then went sideways for
several months, until a final drop that wiped out years of market gains.” – Posted at a trader
discussion board.
MARKET REPORT
Monday, the S&P 500 was up
about 0.5% to 1977 (rounded).
VIX fell about 2% to 11.82 (at 4PM).
The yield on the 10-year Treasury Note was up slightly to
2.54% at the close.
The Bond Ghouls
still aren’t happy. Troubles around the
world are also sending buyers to the US and driving interest rates down.
CORRECTION WATCH – CLUES BOTH WAYS
No Correction: The Percentage of Stocks above their
200-dMA was 62% Friday (data is a day late); 61% is the trouble point for that
stat. The S&P 500 is 7.5% above the
200-dMA and 10% above the 200-day is the trouble point for that one. Sentiment
is 78%-bulls and this indicator will switch to negative at 83%. RSI (SMA/14-day) declined to a neutral 57.
{70 is overbought}.
Correction Now: Statistically, the index is too “quiet”
(as it has been since mid-May) and a pullback is suggested anytime. Chart wise,
the index has moved up to near (or at) the top of the 3-month chart upper trend
line several Monday and that could mean the Index is ready for pullback mode. The
Market Internals on the NYSE returned to negative Monday.
I am still guessing “Not-yet.” on a correction. Expect a short term top soon, assuming it wasn’t today.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks
advancing (NYSE) fell to 49.8% at the close Monday. (A number below 50% for the 10-day average is
generally BAD news for the market.) New-highs outpaced New-lows Friday. The spread (new-highs minus new-lows) was +154.
(It was +83 Friday.) The 10-day moving average of change in the spread remained
minus-4. In other words, over the last 10-days, on
average, the spread has DECREASED by 4 each day. The smoothed 10-dMA of up-volume
was DOWN today and the Internals turned negative on the market, but just
barely.
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 Monday. Sentiment remained 78%-bulls
(5-dMA of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim
funds at the close on Friday (data is a day late). (83% is the negative level
for the Sentiment indicator.) This value was 85%-bulls on 19 May. Sentiment,
Price, Volume & VIX indicators are all 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): HOLD (Earnings announce 31 July)
For my initial discussion see the NTSM blog at:
http://navigatethestockmarket.blogspot.com/2014/05/coppock-curve-says-stock-crash-nowblow.html
Ensco has surpassed the mean and median analyst price targets so time to get more cautious. On the other hand…here’s a report from Seeking Alpha:
“Ensco is still growing quite fast (its ten-year earnings
per share growth rate is 17.5%) but because of investor concern about
oversupply in the rig industry, the price of the stock has found itself lower
than what you'd expect during a period of somewhat normal business conditions
in the industry. On a relative basis, I'd think about it this way. There are
plenty of companies that you can identify as growing north of 10% over the
medium term. The trickier part, particularly here in 2014, is finding a company
trading at a discount to fair value so you can benefit from P/E expansion as
well. That's where Ensco sets itself apart…”
http://seekingalpha.com/article/2312085-ensco-seems-primed-for-20-percent-5-year-annual-returns?uprof=44&dr=1
