“…according to a recent study by Fundstrat, 74 percent of long-only active fund managers are underperforming the S&P 500 so far this year. And they’re doing so by an average of 2.9 percentage points. Some consider this a bullish sign, as these managers will look to catch up to the market by buying any dips in the market. Year-to-date, the S&P 500 is up 9.9 percent…The technicals are also pointing to a higher S&P 500, according to the chart work of Todd Gordon, founder of TradingAnalysis.com.” Story at…
http://finance.yahoo.com/blogs/talking-numbers/why-stocks-are-setting-up-for-a-massive-rally-225420336.html
My cmt: I agree with this scenario as being the most likely, but there could be a little pullback along the way.
LONGER TERM…50% CORRECTION COMING? (Business Insider)
Hussman
interview: “If you look at corporate profits and especially corporate profit
margins, they're one of the most cyclical and mean-reverting series in
economics. Right now, we have corporate profits that are close to about 11% of
GDP, but if you look at that series you will find that corporate profits as a share
of GDP have always dropped back to about 5.5% or below in every single economic
cycle including recent decades, including not only the financial crisis but
2002 and every other economic cycle we have been in. Right now stocks as a
multiple of last year’s expected earnings may look only modestly over valued or
modestly richly valued. Really if you look at the measures of valuation that
are most correlated to the returns that stocks deliver over time say over seven
years or over the next 10 years the S&P 500 in our estimation is about
double the level of valuation that would give investors a normal rate of
return.” Interview at…
http://www.businessinsider.com/the-stock-market-is-overvalued-by-100-2014-11My Cmt: Hussman is presenting data that is incontrovertible. One must question the use of this data as a stock market timing device, because the Hussman Strategic fund has underperformed the S&P 500 by huge amounts (around 100%) on both a 5 and 10-year basis. I post it here as a reminder that the stock market is not risk free and another crash will happen at the end of this business cycle, but when? My guess: When the Fed starts raising rates, it will be a time for caution
“The Jerome Levy Forecasting Center, based in Mount Kisco, New York…attach[s] a 65 percent probability of a worldwide recession forcing a contraction in the U.S. by the end of next year….Levy argues the U.S. and many advanced economies still have balance-sheet excesses exposing them to renewed financial crisis. There is limited room for policy makers to reverse any slump, and low inflation risks tipping into deflation in many parts of the world.” Story at…
http://www.bloomberg.com/news/2014-11-10/predictors-of-29-crash-see-65-chance-of-2015-recession.html
My Cmt: If the Levy Ctr. is right. there will be no rate hike thru the rest of the decade. The Levy Ctr. has been around since 1929. Yes, they called the market correctly back then, as well as the more recent 2007 crash.
Currently, investors have no fear of recession since the select sector SPDR ETF (a collection of cyclical stocks) is outperforming the S&P 500 by nearly 5% over the past month.
NASDAQ COMPOSITE SENDING WARNING SIGNS (CNBC)
“After an impressive rally over the past month, the Nasdaq Composite is trading ever-closer to the all-time highs reached in early 2000 at the height of the tech bubble. But according to Sterne Agee chief market technician Carter Worth, the rally is not as healthy as it appears—which points the way to pain ahead…Worth points out while the Nasdaq Composite itself is up nearly 11 percent the year, the median stock is only up 0.35 percent, and the average stock is actually down 1.4 percent (as of Friday).” – Analysis by Carter Worth
Story and chart at…
Note that the Advance Decline line (a measure of breadth)
is diverging from its index. When the Advance-Decline line is falling, it means
that more stocks in the index are going down than are going up. It is possible for an Index to continue up
when that happens (if the big names like Apple keep going up, for example), but
usually, even the big names follow the majority eventually and prices collapse.
IS THE BEAR MARKET OVER?
Is the bear market over? Technically, yes, for the S&P 500 and the Dow since they have broken above their old highs. So we can conclude that the bear market is over right? Well, not quite. I won’t be convinced until ALL of the major indices have made new highs. You may remember that many said the bear market was over in 2007 when the Dow broke above its prior high of 2000. That didn’t work out too well did it? To break the Bear market, the NASDAQ Composite needs to get significantly move above its old high of 5050. The above evidence shows that it probably won’t. Further, most bear markets have three major declines and so far in this cycle (since 2000) we have had only two.
CHARTS, VIX, RSI – SUGGESTING A SHORT-TERM PULLBACK
The S&P 500 is nearly back to its upper trend line an area that sometimes brings a pullback. VIX is falling back to a level that has recently preceded small pullbacks. Today’s RSI (14-dSMA) was 83 and that remains an overbought value that is quite high. The 3-indicators suggest some pullback of the S&P 500 is coming, but it may be just a return to the lower trend line. I don’t expect much since the Index just completed a correction and this would only be of interest to very short term traders or those looking to add some funds to their stock allocation. Further, none of these indicators are good for short term trading when used alone. All of them can remain extended for some time and since the Index just completed a correction, a pullback is not likely, but we could see another test of the prior low. That would be welcome (although unlikely) and would allow higher highs in the future.
MARKET REPORT
Monday, the S&P 500 was up 0.3% to 2038 (rounded).
VIX was down about 4% to 12.64.
The yield on the 10-year Treasury Note rose to 2.36.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 59% 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 +174. (It was +136 Friday). The 10-day moving average of change in the spread was +12. In other words, over the last 10-days, on average, the spread has increased by 12 each day. Internals switched to neutral on the market, because the smoothed 10-day slope of advancing volume is falling.
NTSM
The long-term NTSM system analysis remains BUY Monday. Price and Volume indicators are positive. Others indicators are neutral. This buy signal 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. 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 price is going to reflect oil prices. If you think they are near a bottom, this is a great buy with high dividends. ESV fell today with oil sliding again.
