“U.S. manufacturers boosted production in October to the highest level in 10 years and wracked [SIC] up a big increase in new orders, a survey of executives found. The Institute for Supply Management said Monday its manufacturing index jumped to 59% from 56.6% in the prior month. Readings over 50% indicate more companies are expanding instead of shrinking.” Story at…
http://www.marketwatch.com/story/manufacturers-boost-production-to-highest-level-in-10-years-2014-11-03
DANGER, DANGER WILL ROBINSON
Chart from…http://www.indexindicators.com/charts/sp500-vs-nyse-stocks-above-200d-sma-params-3y-x-x-x/
Note that the S&P 500 has recovered to new highs…BUT (“Danger, Will Robinson!”) the % of Stocks above their 200-Day moving average remains low at 54% and that’s well below the mean of 64% that has been a turning point in the past. The %-of stocks above their 200-dMA is exhibiting lower highs and lower lows while the Index is at its old highs. That’s suggesting that a lot of stocks have not participated in this rally and that makes the rally suspect. We’ll have to watch to see if the percentage of stocks above their 200-dMA can catch up to the index. My 10-day reading of %-of stocks advancing is positive at this point so perhaps the % of stocks above their 200-dMA will continue to advance and this chart will look better in the next week or two.
BIGGER SELLOFF COMING (CNBC)
“While the recent selloff may be in the rearview mirror, there's a bigger one coming within the next three months, Empire Execution president Peter Costa told CNBC Friday. ‘The market has been on a tear for over five years. We had a small pullback of 8 percent. I don't think that's enough. I think that the market needs to come back a little bit more than that for a longer duration,’ Costa said in an interview with ‘Closing Bell.’" Story at…
http://www.cnbc.com/id/102142330?trknav=homestack:topnews:12
I don’t know. See my musing below…
IS THE CORRECTION REALLY OVER?
Even though I bought the recent low, I had 2-issues with the recent bottom call. First, Sentiment was very high. At most lows, even in 8-10% pullbacks, sentiment (%-bulls in the Rydex/Guggenheim funds I track) drops below 50%. The other issue was the short duration of the pullback. It lasted only 20-trading sessions. I imagine the two issues are related because the pullback was over before investors got cranked up to short the markets. Today the S&P 500 index closed above the old high of 2011 for the second session in a row so I’d say the pullback is over and I will watch for trouble ahead. Many are predicting a Republican win and a win for the Dems would definitely bring some selling in stocks. Ironically, if the Republicans win the Senate (as expected) it may bring some sell the news action. In the end, I haven’t got a clue where the Markets go between now and Christmas. History says, “Up” and everyone seems to agree. I always worry when everyone agrees though, because if everyone says the market is going up, it probably won’t. My guess is up.
SENTIMENT
The sell point for my sentiment indicator is based on a multiple of standard deviations from the mean over a period of 300-days. The funds I use were not around in year 2000 at the top of the dot.com bubble, but they were around at the bottom. At the bottom, the lowest value was about 15% bulls and that would have been a nearly ideal “buy” point. Today, sentiment is fast approaching a “sell” point of 84% and that is nearly the inverse of the year 2000 buy point. (It is also the inverse using statistical analysis.) Sentiment (%-Bulls) has reached 79%-bulls as of Friday’s close and that is the highest value in almost 2-months. That isn’t a good sign for a bull market that is long in the tooth. Sentiment is not good for timing the market though since it can remain elevated for extending periods. It will “set the table” for other indicators to agree and bring about a sell signal eventually.
RSI
Yahoo Finance has changed their RSI calculation to a “front-weighted” formula. They used to use a simple moving average formula for RSI. I calculate it 3-ways: (1) Exponential Moving Average (EMA), (2) Front-weighted, and (3) Simple moving average (SMA) all based on a 14-day period. You get different values for each. For example, Friday’s RSI-SMA was 84 (2) Front-weighted was 65. (3) EMA was 62. I’ve plotted them all against the S&P 500 chart and I prefer the simple moving average method since it seems to give the clearest signals. Today’s RSI (14-dSMA) was 83 and that remains overbought.
MARKET REPORT
Monday, the S&P 500 was down a fraction, but basically unchanged at 2018 (rounded).
VIX was up about 5% to 14.73.
The yield on the 10-year Treasury Note rose slightly to 2.34%.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 61% at the close Monday. (A number above 50% is usually good news for the markets.) New-highs outpaced New-lows Monday. The spread (new-highs minus new-lows) was +217. (It was +291 Friday). The 10-day moving average of change in the spread was +21. In other words, over the last 10-days, on average, the spread has increased by 21 each day. Internals remained neutral on the market, because the smoothed 10-dMA of up-volume is falling.
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 remains BUY Friday. Price and Volume indicators are positive. Others indicators are neutral. This is not important now since a BUY signal was issued near the recent low in mid-October.
MY INVESTED STOCK
POSITION
I moved some funds back into the market on 17 October
2014 as a trade and increased my position
in stocks from 30% to about 40% overall.
I added more 20 Oct, to bring my stock investments up to 50%. I am
semi-retired, 50% is Fully-invested for me. My trading positions were made with
2X ETF’s: SSO, QLD, and IWM. Today I sold those higher risk positions and
bought in the 401k. I remain 50%
invested in stocks.--INDIVIDUAL STOCKS FROM A VALUE HOUND--
ENSCO (ESV): BUY
The chart looks good and oil prices are close to a bottom so I think Ensco is again a Buy. See related video on this page…
http://finance.yahoo.com/q?s=esv&ql=1
Ensco is up about 10% from its recent lows.
