Thursday, the S&P 500 was
DOWN 2% to 1931 (rounded).
VIX rose about 27% to 16.95. (That is less than the 32% rise just 2-weeks
ago and a 32% rise in Jan 2014 when the market fell about 6% top to bottom.)The yield on the 10-year Treasury Note rose slightly to 2.56% at the close; the bond Ghouls apparently didn’t get the word about a panic on Wall Street.
PULLBACK NOW?
Yes, and as is normal after a big down day, tomorrow (Friday)
will probably be an up-day (62% of the time).
Potential bottoms are: 1950 was the 50-dMA so Art Cashin’s line in the sand has already been breached; forget 1950.
1910 – That is currently the bottom of the channel and all “corrections” have ended at a channel bottom in years 2013 & 2014. Can the Fed do it again?
1860 – 200-dMA. (Top to bottom this would only produce a 6% correction. This is a likely guess though.)
1850 – There were numerous closes in this range so there is support here.
1816 – A prior low offering support.
1742 – A prior low offering support. (This would be a 12% correction top to bottom.)
I am betting on a relatively shallow pullback.
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.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks
advancing (NYSE) fell to 46% at the close Thursday. (A number below 50% for the 10-day average is
generally BAD news for the market and the average in a normally rising market
is 53%.) In a reversal, New-lows outpaced New-highs Thursday. The spread (new-highs minus new-lows) was minus-75
(It was +26 Wednesday.) The 10-day moving average of change in the spread fell
to minus -12. In other words, over the
last 10-days, on average, the spread has DECREASED by 12 each day. The smoothed
10-dMA of up-volume was DOWN today and the Internals remained negative 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 switched to
SELL Thursday. Indicators are as follows:
SENTIMENT: Sentiment remained neutral at 77%-bulls (5-dMA
of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim funds
at the close on Wednesday (data is a day late). (84% is the current negative
level for the Sentiment indicator.) Sentiment was 85%-bulls on 19 May. While officially
neutral, a Sentiment of 77%-bulls (3 out of every 4 investors betting long) is
extremely high so I could easily call it negative.
PRICE: The Price indicator switched to negative on the
big down move today. Including Thursday,
down moves have averaged more than twice the size of up moves recently. This
indicator had been deteriorating steadily for the last 2-weeks.
Another Price indicator flashed negative, too. The “panic
indicator” turned negative based on statistical analysis of the size of
moves. Today was big enough to suggest
panic. The panic indicator has only been this high on 2-occasions in the past
4-years: (1) 16 Apr 2010 - the day after the top before a 16% correction and
(2) 15 Apr 2013 - a false negative.
VOLUME: This indicator is neutral, but on the negative
side of neutral.
VIX: The VIX indicator switched to negative on the huge
up move today that left VIX plunging down. VIX is the most accurate and,
therefore, the most heavily weighted indicator. I believe the Option boys.
On the whole, NTSM is SELL.
MY INVESTED POSITION
I will reduce my investment in stocks to 30% on 1 August because of the NTSM indicators have turned negative at the close on 31 July. 30% invested protects the portfolio. If there is a 50% crash I would only lose 15% of the portfolio value. At the same time, if the market goes up, I will make some gains. No system is perfect and the NTSM system has underperformed a buy and hold strategy in the current Fed driven market.
--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.htmlI like the dividend.
ENSCO EARNINGS BEAT…REVENUES MISS (Yahoo Fincnace)
Oil and natural gas driller, Ensco plc (ESV) reported diluted second-quarter 2014 earnings of $1.58 a share (excluding onetime items), which surpassed the Zacks Consensus Estimate of $1.32. The figure also increased 7% from $1.48 earned in the year-earlier quarter. Significant improvement in average dayrates aided the results. Total revenue grew 6% to $1,203.0 million from $1,130.3 million in the year-ago quarter but missed the Zacks Consensus Estimate of $1,219.0 million.
