“U.S. retail sales declined in September and producer prices also fell, worrisome signals on the economy's health that heightened financial market worries over faltering global growth…Retail sales, which account for about one-third of consumer spending, dropped 0.3 percent last month after a 0.6 percent gain in August, the Commerce Department said. It was the first decrease since January.” Story at…
http://www.reuters.com/article/2014/10/15/us-usa-economy-idUSKCN0I41E220141015
WE’RE NOT SURE WHAT’S HAPPENING (Marketwatch)
“In a recent note, Birinyi Associates, headed by
Salomon Brothers veteran Laszlo Birinyi, said the S&P 500 has a 60%
probability of hitting the firm’s year-end target of 2,100, compared with the
80% probability of a month ago. According to the note: ‘The stock market has
had a detour and investors are — and should be — concerned. We continue to
expect higher prices but recognize that there are significant issues which
should be addressed. Our biggest concern is that we are not sure as to what is
happening.’” Story at…http://blogs.marketwatch.com/thetell/2014/10/14/birinyi-not-even-sure-whats-going-on-with-stocks/
As Birinyi notes in the article, falling oil prices are a puzzle.
OIL HITS TWO-YEAR LOW (Marketwatch)
“In its monthly report released Tuesday, the Paris-based IEA [International Energy Agency] said it expects oil demand this year to rise by 700,000 barrels a day, down from its previous estimate of 900,000 barrels a day. At the same time, oil production rose by almost 910,000 barrels a day last month…”
http://www.marketwatch.com/story/oil-continues-to-slide-wti-hovers-around-85-a-barrel-2014-10-14-21033258
Many are saying the oil glut is due to the falling demand associated with slowing economies world-wide. Add production that remains surprisingly high and we have good news for consumers. A price war is ongoing with producers; the Saudis are refusing to back down – gas prices are dropping. What’s not to like? Well, “It’s a bad sign for global growth.”
EBOLA
The Ebola story gets more confusing every day. Just a few weeks ago it was considered to be a disease much like HIV in its transmissibility – very difficult to catch. Now it seems that transmission is easier. And this statement appeared in a CNN.com article regarding the second nurse in Texas who contracted Ebola:
“An official close to the situation says that in hindsight, Duncan [the Ebola patient that died] should have been transferred immediately to either Emory University Hospital in Atlanta or Nebraska Medical Center in Omaha. Those hospitals are among only four in the country that have biocontainment units and have been preparing for years to treat a highly infectious disease like Ebola.” Story at
http://www.cnn.com/2014/10/15/health/texas-ebola-outbreak/index.html
CNBC reported today that the second nurse traveled the day before she felt feverish and the CDC and Frontier airlines are contacting airline passengers (over 125) on the flight.
It will be interesting to see how the 4000 troops in Africa will be treated when they return. Isolation for all?
MARKET REPORT
Wednesday, the S&P 500 was down 0.8% to 1862 (rounded). Volume was about 50% above the norm for the month. The markets were down huge (over 2%) for a good bit of the day and managed to rally back to “only” a 0.8% loss for the day.
VIX was up about 15% to 26.25.
The yield on the 10-year Treasury Note fell to 2.13%.
RSI (14 SMA)
RSI was 30 at the close Wednesday and remains oversold for this indicator.
SENTIMENT
I measure sentiment as %-Bulls {Bulls/(Bulls+Bears)} using amounts invested in selected Rydex/Guggenheim funds. At the top, 18-days ago the %-Bulls was 73%. Yesterday (Tuesday) the %-Bulls had fallen only to 71%. With so much bullish sentiment remaining it appears that markets will continue fall. During the October 2011 correction sentiment (%-Bulls) fell to 20% at the bottom. That was an extreme for a correction (10-20% drop), but this stat needs to fall at least to 50% before a bottom can be confirmed. That could be 2-weeks or 2-months away.
BOTTOM
Again, today the Russell 2000 was up 1%. That is a good sign for the S&P 500 since the Russell led this decline.
LATE DAY BUYING
Buyers stepped in late and that is a bullish sign too.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) to 44% at the close Wednesday. (A number below 50% is usually bad news for the markets.) New-lows outpaced New-highs Wednesday. The spread (new-highs minus new-lows) was minus-577. (It was -324 Tuesday). The 10-day moving average of change in the spread fell to -35. In other words, over the last 10-days, on average, the spread has decreased by 35 each day.
Internals remained neutral on the market because the
up-volume increased. This was due to high volume over all.
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
Wednesday, 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
