{The rationale for this indicator is explained in the out-of-print book “Stock Market Logic” by Norman Fosback.}
There’s up-volume; down volume and unchanged volume. Unchanged volume is
the volume in millions of shares that changed hands at a price that was
unchanged. Unchanged volume is very low at bottoms because there are big
fluctuations in price at bottoms and few issues trade unchanged in price. I’ve tracked unchanged volume on the NYSE as
a curiosity and I have graphed historical data going back 2-1/2 years. Since Jan 2012, there have been only 6-days
with unchanged volume as low as it was yesterday (Thursday) and 5 were near
bottoms. On a normal day, unchanged volume is about 50-million shares.
Yesterday, 8-million shares were traded unchanged.
This indicator suggests that a bottom is near…or maybe not. There was only 1 correction of 10% during the period I examined so the sample size is small, but it also predicted small turnarounds when the markets were down about 5%. I won’t believe it until I see a successful retest of a bottom, but it is interesting and any good news would be welcome for the bulls. Unfortunately, there was not a successful test Friday. The S&P 500 made a low of 1910 on 7 August so today’s low was a test of that prior low. There is a ton more fear now so this was not a successful test suggesting further declines.
200-DAY MOVING AVERAGE
Today the S&P 500 closed essentially at the 200-dMA. This is a key point for the markets. Traders on CNBC are calling for more trouble ahead and they may be right.
LATE DAY SELLING
The Pros sold hard in advance of the weekend.
RSI
RSI (14-SMA) is 33 and that is not yet oversold suggesting more downside ahead.
MARKET REPORT
Friday, the S&P 500 was down 1.1% to 1906 (rounded).
VIX was UP about 13% to 21.24.
The yield on the 10-year Treasury Note fell to 2.29%.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) collapsed to 40% at the close Friday. (A number below 50% is usually bad news for the markets.) New-lows outpaced New-highs Friday. The spread (new-highs minus new-lows) was minus-404. (It was -207 Thursday). The 10-day moving average of change in the spread fell to -29. In other words, over the last 10-days, on average, the spread has decreased by 29 each day.
Internals are negative 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
Friday, the NTSM long term indicator switched to SELL. The VIX indicator switched to sell yesterday. Volume switched to sell today. Sentiment remains high.
I will wait to see how the markets react Monday. If they move up, I’ll wait before I reduce stock holdings. If they decisively crash below the 200-dMA, I will cut my stock allocation to about 30%. I’ll try to post my decision Monday morning.
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.
50% is Fully invested for me since I am
semi-retired. --INDIVIDUAL STOCKS FROM A VALUE HOUND--
ENSCO (ESV): HOLD
I married this stock and that is always a mistake. The divorce will be messy. That probably means it is near a bottom.
