“The Institute for Supply Management said Monday that its manufacturing purchasing managers’ index—a guage of sentiment among purchasing executives—eased slightly to 58.7 in November, from 59.0 in October. Readings above 50 indicate expansion, and the index has been in such territory for 18 consecutive months now.” Story at…
http://online.wsj.com/articles/ism-manufacturing-index-slows-slightly-in-november-1417446885
CREDIT FREEZE COMING? THINK HOUSING CRISIS!
“It's not just the Saudis who could get much poorer from the oil price free fall. Everyone could suffer if the collapse triggers a wave of defaults through the high-yield debt market, and in turn, hits stocks. The first to fall: the banks that were last hit by the housing crisis. Why could that happen? Well, energy companies make up anywhere from 15 to 20 percent of all U.S. junk debt, according to various sources..."This is the one thing I've seen over and over again," said Larry McDonald, head of U.S strategy at Newedge USA's macro group. "When high yield underperforms equity, a major credit event occurs. It's the canary in the coal mine." Story at….
http://www.cnbc.com/id/102223823?trknav=homestack:topnews:5
THE HUSSMAN WEEKLY MARKET COMMENTARY (Hussman Funds)
“…the S&P 500 is more than double its historical valuation norms on reliable measures (with about 90% correlation with actual subsequent 10-year market returns), sentiment is lopsided, and we observe dispersion across market internals, along with widening credit spreads. These and similar considerations present a coherent pattern that has been informative in market cycles across a century of history – including the period since 2009. None of those considerations inform us that the U.S. stock market currently presents a desirable opportunity to accept risk…for investors with spending horizons less than about 50 years into the future, a relatively conservative stance in equities is presently encouraged solely on the principle of matching the duration of assets to spending needs, even if one has no particular view about near-term or long-term market direction.” - John Hussman, PhD, Weekly Market Commentary at…
http://www.hussmanfunds.com/wmc/wmc141201.htm
My cmt: I like John Hussman’s analytical approach, but his bearish call was very early in this cycle (several years ago) and that has made his fund a huge under-performer in recent years.
"The market's expectation of a mid-year rate hike sounds "reasonable" despite recent weakness in oil prices, said William Dudley, the president of the New York Fed, on Monday. Overall, falling energy prices are "beneficial" for the U.S. economy, Dudley said, in a speech at Bernard M. Baruch College in New York." Story at...
http://www.marketwatch.com/story/fed-on-course-for-mid-year-hike-despite-lower-oil-price-dudley-2014-12-01?dist=afterbell
SENTIMENT – 83% BULLS
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 83% and that is nearly the inverse of the year 2000 buy point. (It is the inverse using statistical analysis and it happens to be the nearly inverse in real numbers too.) Sentiment (%-Bulls) has reached 82%-bulls as of Friday’s close and that is the highest value in over 6-months. I’ve commented before that another pair of Rydex long/short funds are invested 96%-bulls calculated as {bulls/(bulls+bears)} or 25 to 1 Bulls. These are extreme numbers.
At first glance it would seem that if everyone is a bull it is good for the stock market, but that’s not the case at all. If everyone is a buyer, there will be few sellers. With few sellers, the market will tend to stall out because the stock prices only go up when there are sellers offering shares to buyers who are willing to buy them at higher prices. If the stock market stalls, some will start to sell. If investors feel good, other buyers may step in after a small dip. If the initial selling coincides with some bad news (as it did during the recent Ebola scare when the sentiment hit 80%-bulls) selling will pick up leading to a correction, pullback or crash depending on the news and investor fear. I am not suggesting anyone sell stocks based on sentiment alone, indeed Sentiment was higher for a few weeks last May without serious consequences; but it is a warning and will require heightened awareness if the markets begin to show signs of trouble via other indicators or extreme bad news.
Bottom line: High Sentiment makes the Stock market inherently unstable - right now, it won’t take much to push it down.
MARKET REPORT
Monday, the S&P 500 was down about 0.7% to 2053 (rounded). VIX was up about 6% to 14.11. I am again surprised by the size of this up move.
VIX is up about 17% in 2-days. It
shows concern by the options market.
The yield on the 10-year Treasury Note rose to 2.22.Repeating: Between the VIX and Bond Market, it makes one wonder whether all those bears (Hussman et al.) might be right about a coming crash. There have been big moves for a relatively small drop in stock market prices. I'll be watching the indicators. On a positive note...
The down move Monday exceeded my statistical parameters and suggests an up day tomorrow (correct about 62% of the time) even as internals are deteriorating.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 51% at the close Monday. (A number above 50% is usually good news for the markets.) In a REVERSAL, New-lows outpaced New-highs Monday. The spread (new-highs minus new-lows) was minus-107. (It was +141 Friday). The 10-day moving average of change in the spread was -19. In other words, over the last 10-days, on average, the spread has decreased by 19-each day. This is a worrisome trend. We’ll have to see if it continues.
Internals remained neutral 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 HOLD Monday. Only the Price indicator remains positive. Others are neutral, but almost all indicators deteriorated today.
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): HOLD
It certainly looks like the oils and oils services made a bottom last Friday. Ensco price is going to reflect oil prices. If you think they are near a bottom, this is a great buy with high dividends. If not; it’s a dog. I’m tempted to sell after today’s rout (ESV was down 9%.), but I’d like to watch this for a while. I’ve already taken a beating and it can’t get too much worse.
ENSCO ANALYSIS FROM THE STREET.COM
http://www.thestreet.com/story/12968993/1/ensco-esv-stock-hits-52-week-low-as-oil-prices-hit-four-year-low.html?puc=yahoo&cm_ven=YAHOO
I will sell ENSCO as a tax loss strategy this year to off-set gains and minimize taxes.
