Chicago PMI…Consumer Confidence

CHICAGO PMI (Dow Jones Business News)
“The Chicago Business Barometer, commonly known as the Chicago PMI, fell to 60.5 this month from 64.3 in August. Any reading above 50 indicates expansion.” Story at…

http://www.nasdaq.com/article/chicago-pmi-points-to-slightly-slowing-growthupdate-20140930-00889

CONSUMER CONFIDENCE (USA Today)

“A closely watched index of consumer confidence tumbled to 86 from 93.4 in August after rising four straight months, the Conference Board said Tuesday. The August reading was the highest since October 2007…’All told, consumers expect economic growth to easing the months ahead,’ [Lynn Franco, the Conference Board's director of economic indicators] said.” Story at…
http://www.usatoday.com/story/money/business/2014/09/30/consumer-confidence-september/16453621/
 
MARKET REPORT
Tuesday, the S&P 500 was down about 0.3% to 1972 (rounded).
VIX was up about 2% to 16.33.
The yield on the 10-year Treasury Note rose slightly to 2.50% at the close.

 

Some of the market internals are hugely negative, while the price of the S&P 500 has only fallen about 2% from its high.  Curiously, price-volume action looks like the S&P 500 is headed up.  Usually, the majority wins (most stocks are going down – they just aren’t in the index) so it appears more likely that the Index will fall from here. With conflicting indicators, perhaps the Index will just test the prior low at 1966 and move up. We’ll see.

 

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 43% at the close Tuesday.  New-lows outpaced New-highs Tuesday.  The spread (new-highs minus new-lows) was minus-150. (It was -133 Monday). 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. Internals switched to neutral today because up-volume increased.

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

Tuesday, the NTSM is HOLD.  Volume was positive, but all other indicators are neutral.

MY INVESTED STOCK POSITION

I made a BUY call on Monday, 18 August 2014 because the charts were looking better; therefore, I upped my invested percentage to 50% invested in stocks on Tuesday 19 August.  The 5-10-20 Timer and Market Internals both gave positive signals on 19 August confirming the previous day’s Buy signal. 50% is Fully invested for me since I am semi-retired.
                            --INDIVIDUAL STOCKS FROM A VALUE HOUND--
ENSCO (ESV): BUY
For my initial discussion see the NTSM blog at:
http://navigatethestockmarket.blogspot.com/2014/05/coppock-curve-says-stock-crash-nowblow.html
ENSCO’s chart doesn’t look good now since it has fallen below prior lows as the oil drillers have not performed well.  On the plus side, dividend is 6%. PE is 8.5 so downside is somewhat limited.
TOO CHEAP TO IGNORE (Forbes)
“Ensco has a strong buy rating according to ValuEngine and is 19.6% undervalued with a one-year price target at $50.25.” – Story at…
http://www.forbes.com/sites/investor/2014/09/22/transocean-and-three-other-energy-stocks-too-cheap-to-ignore/?partner=yahootix
Oil stocks continue to get pummeled.

Secret FED Tapes…Market Crash? Hussman’s Prediction…A Bottom? Maybe…

SECRET TAPES SHOW LAX FED OVERSIGHT OF GOLDMAN (NY Post)
“A former examiner for the Federal Reserve Bank of New York has dropped a major bomb on Wall Street by releasing 46 hours of secretly recorded audio that shows how the supposed government watchdog is nothing more than a lap dog for Goldman Sachs and other financial institutions it is tasked with regulating.” Story at…
http://nypost.com/2014/09/27/secret-recordings-expose-lax-wall-street-oversight-by-feds/

MARKET CRASH – JOHN HUSSMAN, PhD (Hussman Funds)

“The most hostile subset of market conditions we identify couples overvalued, overbought, overbullish extremes with a breakdown in market action: deterioration of breadth, leadership and other market internals, along with a shift toward greater dispersion and weakening price cointegration across individual stocks, sectors and security types (what we sometimes call “trend uniformity”). The outcomes are particularly negative, on average, when that shift is joined by a widening of credit spreads. That’s a shift we observed in October 2000. It’s a shift we observed in July 2007. It’s a shift that we observe today…I should be clear that market peaks often go through several months of top formation, so the near-term remains uncertain…Still…As conditions stand, we currently observe the ingredients of a market crash.” Weekly Market Commentary from John Hussman, PhD at…
http://www.hussmanfunds.com/wmc/wmc140929.htm

WHAT THE LONGTERM CHART SAYS…

Correction back to 1650 (or so) is entirely reasonable and that would be about a 15-20% correction.  When? That’s anybody’s guess. Regarding a crash, that is possible too, but again the timing is the issue.  None of the longer term indicators are suggesting a crash now.  If markets deteriorate, the NTSM indicators will act up.

 

WHAT THE SHORT TERM CHART SAYS:

IF THE S&P 500 BOUNCES UP FROM 1950 – NO CORRECTION

Basic Chart from…
http://finance.yahoo.com/q/bc?s=%5EGSPC+Basic+Chart

STOCKS ABOVE THEIR 200-dMA (Index Indicators)

Only 44% of all stocks are above their 200-dMA as of Friday’s close. This stat remains more than 1-standard deviation below the mean and that level is a point associated with a falling market or even a bottom. This is another way of looking at Breadth.  My own analysis of breadth (I measure as the percentage of stocks advancing) shows that only 45% have gone up over the last 10-days. Those are worrisome stats for the bulls; but the markets could be approaching a bottom and actually may have bottomed already.

 

HIGH YIELD BONDS (SeekingAlpha)

“As we have written about, historically speaking the high yield bond market has performed well during periods of rising rates, due to the fact that the high yield market tends to have a lower duration than other fixed income asset classes, has a zero to negative correlation to Treasuries, and generally rates are rising during periods of improved economic environments, which is a positive for these credits.” - To learn more about the risks with actively managed ETFs visit our website AdvisorShares.com.
Story at…
http://seekingalpha.com/article/2520685-is-this-time-different-a-look-at-duration?ifp=0

MARKET REPORT

Monday, the S&P 500 was down about 0.25% to 1978 (rounded).

VIX was UP about 8% to 15.98.
The yield on the 10-year Treasury Note fell to 2.49% at the close.

 

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of the percentage of stocks advancing (NYSE) rose 1% to 46% at the close Monday.  New-lows outpaced New-highs Monday.  The spread (new-highs minus new-lows) was minus-133. (It was -117 Friday). The 10-day moving average of change in the spread rose to minus-9. In other words, over the last 10-days, on average, the spread has decreased by 9 each day. Internals switched to negative today due to falling Up-volume.

 

While internals look poor overall, there are signs of improvement that suggest perhaps 1966 was the bottom last Thursday.  For example, new-high/new-low data did not appreciably deteriorate on today’s down day. And the 10-dMA of stocks advancing was up 1%.

 

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

Monday, the NTSM is HOLD.  Volume was positive, but all other indicators are neutral.

 

MY INVESTED STOCK POSITION

I made a BUY call on Monday, 18 August 2014 because the charts were looking better; therefore, I upped my invested percentage to 50% invested in stocks on Tuesday 19 August.  The 5-10-20 Timer and Market Internals both gave positive signals on 19 August confirming the previous day’s Buy signal. 50% is Fully invested for me since I am semi-retired.
                            --INDIVIDUAL STOCKS FROM A VALUE HOUND--
ENSCO (ESV): BUY
For my initial discussion see the NTSM blog at:
http://navigatethestockmarket.blogspot.com/2014/05/coppock-curve-says-stock-crash-nowblow.html
ENSCO’s chart doesn’t look good now since it has fallen below prior lows as the oil drillers have not performed well.  On the plus side, dividend is 6%. PE is 8.5 so downside is somewhat limited.
TOO CHEAP TO IGNORE (Forbes)
“Ensco has a strong buy rating according to ValuEngine and is 19.6% undervalued with a one-year price target at $50.25.” – Story at…
http://www.forbes.com/sites/investor/2014/09/22/transocean-and-three-other-energy-stocks-too-cheap-to-ignore/?partner=yahootix