“…could the current correction be the start of something bigger?...The break of the bullish trend line is important and suggests that a further corrective process is likely. The last two times that the markets behaved in this way was in [2010 and 2011]…[in both cases]…the initial plunge in the market that broke the bullish trend lines led to a basing process that lasted for a period of time before the "bull market" was able to resume. IMPORTANTLY, the initial rebound in the market was NOT A BUYING opportunity, but rather an opportunity to reduce portfolio risk.”
Chart and commentary from Street Talk Alive at… http://streettalklive.com/index.php/blog.html?id=2458
The above chart is similar to the current chart regarding a major trend break. On a positive note, one big difference is seasonality. In 2010 and 2011 the Trend line break occurred in the spring. The Basing Process continued thru the summer with the final test of the low in the fall when the Markets historically experience trouble. This time the correction started in the fall as the markets enter a historically good period for the markets. Further, the correction may be over. See below…
CORRECTION MAY BE OVER
The upper trend line of the correction downtrend was about 1935-1940 as of today. (See yesterday’s blog "Down Trend Over?...") Today the S&P 500 closed at 1950. Breaking above the line delineating the top of the downtrend was bullish and becomes even more so if the Index can hold above the 1935-1940 area tomorrow. That would indicate a trend break, or in simple English, the correction can be considered over since the new trend would be up. In the short term, Market Internals look positive. Looking at the longer term indicators, my NTSM indicator is HOLD now and if the VIX drops a bit more it may actually turn BUY. This all is pointing toward “correction over” and maybe I’ll get an all-clear soon.
FIRMING LABOR MARKET (Reuters)
“The number of Americans filing new claims for unemployment benefits rose last week, but the underlying trend firmly pointed to strengthening labor market conditions. Initial claims for state unemployment benefits increased 17,000 to a seasonally adjusted 283,000 for the week ended Oct. 18…” Story at…
http://www.reuters.com/article/2014/10/23/us-usa-economy-unemployment-idUSKCN0IC1FX20141023
CATERPILLAR BEATS (CNBC)
“Caterpillar reported a quarterly profit that soared past Wall Street expectations on Thursday…The heavy equipment giant posted third-quarter earnings of $1.72 a share, compared to $1.45 in the year-earlier period. Revenue for the quarter came in at $13.55 billion, against the comparable year-ago number of $13.42 billion.” Story at…
http://www.cnbc.com/id/102112037?trknav=homestack:topnews:7
Caterpillar is watched since it is the poster company for cyclical stocks. This is good news for those who have been worried about global recession. It is especially good news to see increased revenues.
EUROZONE EXPANDING (MarketWatch)
“Data firm Markit Thursday said its monthly composite purchasing managers index--a measure of activity in the manufacturing and services sectors in the currency bloc--rose to 52.2 from 52.0 in September. A reading below 50.0 indicates activity is declining, while a reading above that level indicates it is increasing.” Story at…
http://www.marketwatch.com/story/eurozone-pmi-picked-up-slightly-in-october-2014-10-23
That too is good news. There had been worries that Europe’s slowdown would lead to recession in Europe.
MARKET REPORT
Thursday, the S&P 500 was Up about 1.2% to 1950 (rounded). The Index lost 10 points late in the day on new Ebola worries in NY. A doctor who had been in Africa came down with symptoms consistent with Ebola and is being tested.
VIX was Down about 8% to 16.53.
The yield on the 10-year Treasury Note rose to 2.27%. (Looks like the bond guys agree with the stock guys.)
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 56% at the close Thursday. (A number above 50% is usually good news for the markets.) New-highs outpaced New-lows Thursday. The spread (new-highs minus new-lows) was +78. (It was +73 Wednesday). The 10-day moving average of change in the spread was +29 . In other words, over the last 10-days, on average, the spread has increased by 29 each day. Internals switched to positive 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
The long-term NTSM system analysis is HOLD on the market.
MY INVESTED STOCK POSITION
I moved some funds back into the market on Friday, 17
October 2014 as a trade and increased my position
in stocks from 30% to about 40% overall.
I added more Monday, 20 Oct, to bring my stock investments up to 50%.
This move was based on my comments 16 Oct that a Tradable bottom had been
set. It appears that this may be a
durable bottom and not just a trade.
Either way, since I am semi-retired, 50% is Fully invested for me.--INDIVIDUAL STOCKS FROM A VALUE HOUND--
ENSCO (ESV): BUY
