“We are not seeing any signs still of a major top. The July highs in the S&P, the New York Composite, obviously the July high in the Dow Jones, were all confirmed by the advance-decline lines as I pointed out before. You asked me about selling pressure—that really has not shown any kind of a dynamic increase. Historically, we have seen a significant increase in selling pressure at some point prior to the major market top. And there has been none.”
http://www.financialsense.com/contributors/richard-dickson/market-due-10-percent-correction
GEEKS NOTE: USING RYDEX FUNDS FOR SENTIMENT
“Sentiment has traditionally been measured by taking
polls of selected groups of investors, advisors, investing professionals,
etc…Using subjective measures like sentiment polls makes it difficult to determine
exactly when these extremes have been reached, and polls have never been
particularly good for bottom or top picking…The Rydex Asset Ratio makes it
possible for us to analyze sentiment based upon what investors are actually
doing with real money.” - Carl Swenlin. Commentary at…http://stockcharts.com/articles/decisionpoint/2014/07/rydex-ratios.html
I use long and short Rydex funds to calculate a straight forward “Bulls/(Bulls +Bears)” percentage. The above article presents several indicators built from Rydex data. The NTSM sentiment value is a 5-dMA of that data. Sentiment sets the stage for a market move, but it does not give good buy or sell values because sentiment can remain elevated (either way) for months as we have seen in 2013 and 2014.
SENTIMENT
Yesterday, the 5-dMA of “Bulls/(Bulls+Bears was 75%. 3-weeks ago it was 81%. Usually, the %-bulls sentiment value peaks after a top as the dip buyers move in after a top. Now it is drifting down as investors worry whether this is really the top. I think this allows the markets to go higher – assuming there is no bad news to derail the train.
MARKET REPORT
Wednesday, the S&P 500 was
up 0.2% to 1987 (rounded). VIX fell about 6% to 11.52.
The yield on the 10-year Treasury Note was rose slightly
to 2.47% at the close.
CORRECTION WATCH
(1) No Correction:
Market Internals are positive. The Percentage of Stocks above their 200-dMA rose to 63% Tuesday (data is a day late), but it is most likely up today. 61% is the trouble point for this stat so it is on the edge. RSI is only 55 (70 is overbought). The S&P 500 is 7.5% above its 200-dMA. 10% is the level that frequently indicates a correction.
(2) 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 moved
up to near the top of the 3-month chart upper trend line today (Wednesday) and
is making a double top. That could mean
the Index is ready for pullback mode.
Overall, it appears that the Index can go a bit higher.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks
advancing (NYSE) remained 50.4% 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 +152
. (It was +157 Tuesday.) The 10-day moving average of change in the spread fell
to +8. In other words, over the last 10-days, on
average, the spread has INCREASED by 8 each day. The smoothed 10-dMA of up-volume
was UP today and the Internals remained 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 75%-bulls
(5-dMA of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim
funds at the close on Monday (data is a day late). (83% is the current negative
level for the Sentiment indicator.) This value was 85%-bulls on 19 May. Price,
Sentiment, Volume & VIX indicators are 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 I rate it hold, but the 6% yield is worth owning. Not everyone agrees. Here is an opposing view:
DON’T BUY ENSCO: RAYMOND JAMES (Seeking Alpha)
“While some analysts are beginning to see
value in shares of battered offshore drillers, the team at Raymond
James thinks conditions will get worse
before they get better. After a strong decade, the deepwater drilling rig market
is facing a multi-year down-cycle, RJ says; most previous offshore drilling
cycles have been short-lived thanks to sudden demand shocks that have
self-corrected relatively quickly, but this downturn is more of a new rig
supply problem compounded by a moderation in offshore spending from the
suddenly “return driven” multinational major oil companies - meaning this
down-cycle should be more drawn out than usual.” Commentary at…
http://seekingalpha.com/news/1854605-its-still-not-time-to-buy-offshore-drillers-raymond-james-says?uprof=44
