“The number of Americans filing new claims for jobless benefits fell to a 14-year low last week, a positive signal for the labor market that could counter doubts over whether the economy is shifting into a higher gear.
Initial claims for state unemployment benefits dropped
23,000 to a seasonally adjusted 264,000, its lowest level since 2000, the Labor
Department said on Thursday.” Story At…
http://www.cnbc.com/id/102092928Consensus for claims was 290,000. This was a very good report.
MANUFACTURING STILL GROWING
“The Philadelphia Federal Reserve on Thursday said companies in its region are still growing at a rapid pace and fielding new orders. Another strong reading for the Philadelphia Fed’s manufacturing index in October countered a surprisingly weak report from the New York Fed a day earlier. The Philadelphia report is older, more reliable and less prone to sharp swings.” Story at…
http://www.marketwatch.com/story/philly-fed-shows-manufacturers-still-growing-rapidly-2014-10-16
START NIBBLING (CNN/Money)
"This isn't the time to sell. This is when you make your shopping list and start nibbling. The stock market is the only business where people don't want to buy when things go on sale," said Jeffrey Saut, chief investment strategist for Raymond James.”
http://money.cnn.com/2014/10/15/investing/stocks-plunge-not-like-2008/index.html?iid=HP_LN
I tend to move funds in blocks going from fully invested to a smaller amount. An alternative method can often be seen when following late-day trading. The Pros seem to buy on the way down, although there will be some serious buying at a technical low. “Nibbling” is not a bad strategy, because it is hard to call an exact bottom.
MARKET REPORT
Thursday, the S&P 500 was essentially unchanged at 1863 (rounded). Volume was high, but down from yesterday.
VIX was down about 4% to 25.20.
The yield on the 10-year Treasury Note rose to 2.15%.
A BOTTOM?
There are arguments AGAINST today as a bottom:
1. Sentiment is too high.
2. Breadth (%-advancing stocks) was too high at the low Wednesday. Even the intraday low saw breadth of only about 20%-advancers. That value needs to be closer to 10%. It was 1% at the October 2011 low and 14% at the June 2012 low.
3. Corrections greater than 8% don’t generally go from
top to bottom in 20-days. The average is
more than twice that value over the last 5-years.
There are good arguments FOR bottom today:
1. The S&P 500 tested the prior low with improving market internals and reduced selling.
2. The Russell 2000 was up another 1.3% today. The small caps led the downturn and seem to be leading the upswing.
3. There was late-day buying, but not extreme. The day was characterized by up and down swings all day.
My guess is that the S&P 500 made a tradable bottom that will result in significant movement up for a week or more. The catch is that almost any bad news could trip it up. Longer term (a couple of weeks) I think the S&P 500 needs to retest the low.
RSI (14 SMA)
RSI was 25 at the close Thursday and remains oversold for this indicator.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 45% at the close Thursday. (A number below 50% is usually bad news for the markets.) New-lows outpaced New-highs Thursday. The spread (new-highs minus new-lows) was minus-117. (It was -577 Wednesday). The 10-day moving average of change in the spread rose to +12. In other words, over the last 10-days, on average, the spread has increased by 12 each day.
Internals improved dramatically today but remained neutral on the market because the 10-dMA of stock advancing remains below 50%.
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
Thursday, the NTSM long term indicator remained Sell. The VIX indicator and Volume are SELL while Sentiment remains high. I would like to see the VIX fall some to convince me that the options boys think this correction is over.
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
