GLOBAL SLOWDOWN THREATENS RECOVERY (WSJ)
“Slumping exports in Germany are adding fuel to worries about a third recession in the eurozone in six years. China is slowing in the wake of its credit boom, weighing on countries throughout the region. Japan’s economy has recently contracted despite a policy offensive to lift it from years of stagnation. Other onetime powerhouses, from Brazil to South Africa, also are struggling. The pullback is sending tremors through global markets…’A sudden shift in sentiment could easily cascade across the entire globe,’ IMF Managing Director Christine Lagarde told the fund’s governing board. ‘There is too little economic risk-taking, and too much financial risk-taking.’” Story at…
http://online.wsj.com/articles/global-signs-of-slowdown-ripple-across-markets-vex-policy-makers-1413148874
CARTER WORTH – CORRECTION NOT OVER YET (CNBC - Video)
When the market is down 5%, typically we go down more. There have been 209 corrections equal or greater than 5% over the market history. The average decline is 12%; the median is 8%. Of the 209 corrections the average duration has been 38-sessions while the median was 22-sessions. This downturn is only 16-sessions old now. Video at…
http://webcast.cnbc.com/show/futuresnow
THREE OF “THE TOP TEN SIGNS WHEN SELLING IS OVER” (CNBC)
“…VIX—a widely
cited gauge of market fear—would have to get at least to 26 and perhaps to 32
before that would indicate a fear top….Bond yields…the general direction should
be higher before indicating slowdown worries have subsided…Small caps need to
show better performance to give investors confidence that we have made a bottom
in large caps—both asset classes have to start acting more consistently with
respect to their common fundamentals." See the rest of the story at…
http://www.cnbc.com/id/102086383?trknav=homestack:topnews:1WATCHING THE RUSSELL 2000
The Russell 2000 covers the smaller cap stocks and is an important index to watch. It signaled the start of the correction with declines ahead of the S&P 500 and many are watching it to see if the small caps can lead the markets up. Russell 2000 is down about 12% while the S&P 500 is down 6.6%.
Today the Russell 2000 was up 1.2%. That could be a signal for a bit more of a bounce for the S&P 500. If not, it could easily decline to around the 1815 or even the 1750 level. A bounce remains overdue though and selling does seem to be slowing down.
MARKET REPORT
Monday, the S&P 500 was up 0.2% to 1878 (rounded).
VIX was down about 8% to 22.79.
The yield on the 10-year Treasury Note fell to 2.19%.
RSI (14 SMA)
RSI hit 28 today and that is oversold for this indicator. It’s a popular one so perhaps we’ll finally see that bounce.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 41% at the close Tuesday. (A number below 50% is usually bad news for the markets.) New-lows outpaced New-highs Tuesday. The spread (new-highs minus new-lows) was minus-324. (It was -409 Monday). The 10-day moving average of change in the spread rose to -17. In other words, over the last 10-days, on average, the spread has decreased by 17 each day.
Internals switched to neutral on the market because the 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 long term indicator flashed Sell again. The VIX indicator and Volume are SELL while Sentiment remains high.
MY INVESTED STOCK POSITION
The NTSM system indicated SELL on Friday, 10 October
2014; therefore, I reduced my invested percentage to 30% invested in stocks on
Tuesday 14 October. (I waited to avoid
selling on the huge down day 13 October.)
30% is a very conservative allocation but
it allows for some gains if I am wrong.
No system is perfect. --INDIVIDUAL STOCKS FROM A VALUE HOUND--
ENSCO (ESV): HOLD
