Wednesday, the S&P 500 was unchanged at 1920 (rounded).
VIX fell about 3% to 16.37.
The yield on the 10-year Treasury Note dropped to 2.47% at the close; the bond Ghouls are still worried.
The percent of stocks on the NYSE above their 200-dMA fell
to 48% Tuesday (data is a day late). 61%
is the trouble point for this stat.
BOUNCE TIME
Tomorrow will see a bounce upward based on the double bottom test with
advancers beating decliners and an upward tick.
I don’t think the pullback is over, but it could be. (This isn’t an
exact science.) In a true correction,
the first bounce can be short-lived and may last only 2-days so the bounce may
be over after Wednesday and Thursday. A
big up day would indicate short covering and that might be a good time to
establish a short position. We’ll see.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks
advancing (NYSE) was up slightly to 40%
at the close Wednesday. (A number below 50%
for the 10-day average is generally BAD news for the market. The average in a normally rising market is
53%.)
New-lows outpaced New-highs Wednesday. The spread (new-highs minus new-lows) was minus-38. (It was minus-46 Tuesday.) The 10-day moving
average of change in the spread rose to minus -19. In other words, over the last 10-days, on
average, the spread has DECREASED by 19 each day. The smoothed 10-dMA of up-volume
was UP today and the Internals switched to neutral 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 remaned
SELL Wednesday.Indicators are as follows:
SENTIMENT: Sentiment remained neutral, but fell to 75%-bulls (5-dMA of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim funds at the close on Tuesday (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 75%-bulls (3 out of every 4 investors betting long) is extremely high so I could easily call it negative. PRICE, VOLUME and VIX indicators are all negative. NTSM remains SELL.
MY INVESTED POSITION
I reduced my investment in stocks to 30% on 1 August because
of the NTSM indicators 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 Fed driven market currently in
place.--INDIVIDUAL STOCKS FROM A VALUE HOUND--
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
I like the dividend. With a PE of 8.5, ESV has limited downside. During corrections I hang onto low PE stocks and funds.
