“There are several contributing factors to the slide in oil prices and one of them is the unwinding of the large non-commercial (AKA: speculators) net long position in oil. As a percentage of total open interest, speculative longs reached ridiculously elevated levels this year as traders incorrectly bet on higher oil prices. Their net long position as a percent of total open interest…has come down with the recent slide but still remains near multi-decade highs excluding this year’s ramp up and indicates speculators may have more to go to unwind their large long position in oil.”
Commentary, charts and analysis at…My cmt: Yes, the chart suggests $45 per barrel.
SENTIMENT SAYS THE MARKET IS NOT CLOSE TO TOPPING (Marketwatch)
Thursday’s impressive rebound in the stock market is just what contrarian analysts were expecting. And they think more gains are in store. That’s because sentiment conditions in recent weeks have been far different than what normally is seen at market tops. Not only did the bulls quickly retreat in the wake of that weakness, bullish sentiment was surprisingly subdued even before that weakness began…Current conditions are…far different than the excessive optimism that contrarians consider a hallmark of major tops in the equity market. Commentary at…
http://www.marketwatch.com/story/the-stock-market-is-not-even-close-to-topping-out-2014-12-11
My cmt: Not by the numbers I track. See my Sentiment paragraph below. There is still a lot of complacency as evidenced by a high sentiment as of Thursday’s close.
GOOD ENVIRONMENT FOR OWNING STOCKS (MarketWatch)
“Ray Dalio, who oversees about $150 billion as the founder of Bridgewater Associates, said that we’re currently in a “good environment” for owning stocks, but that the climate could change in a year or two because “the effectiveness of monetary policy will be less…“We are in a mid-part of the cycle, and this is an easy part,” he said. “We are long equities. ... We are holding those positions, and it’s a relatively good time.” Story at…
http://www.marketwatch.com/story/ray-dalios-no-brainer-stock-may-dip-when-monetary-impact-weakens-2014-12-11
STATISTICALLY SIGNIFICANT DAY
Friday was a statistically-significant down-day suggesting an Up-day Monday about 62% of the time. Since the Index is now at the 50-dMA and only about 3% above the 200-dMA, I’d expect Monday to be a good day for a bounce.
HINDENBURG OMENS
The pattern of Hindenburg Omens continued today, Friday; that makes 6 in a row, but I am getting tired of tracking this. The imbalance in new-high/new-low value is more important now. Let’s see if it reverses Monday.
SENTIMENT
I measure Sentiment as %-bulls calculated as a 5-dMA (bulls/{bulls+bears}) in selected Rydex/Guggenheim funds. My sentiment value dropped a little to 83%-bulls, still a truly extreme level and close to sell for this one indicator.
MARKET REPORT
Friday, the S&P 500 was DOWN 1.6% to 2002 (rounded).
VIX was UP about 5% to 21.08.
The yield on the 10-year Treasury Note fell to 2.08.
PERCENTAGE OF STOCKS ABOVE THEIR 200-DAY MOVING AVG
Chart from http://www.indexindicators.com/charts/nyse-vs-nyse-stocks-above-200d-sma-params-3y-x-x-x/
NOTE: In addition to the low value of the % of stocks above their 200-dMA, the NYSE Composite has made a convincing triple top. There is no good news in the above chart.
CORRECTION THOUGHTS
The fear over credit market issues arising from the falling oil price is a concern and could lead to another correction or worse. Still, I am unsure of its impact on the stock market. On the surface it would seem to have potential to be a very serious problem. On the other hand, analysts have extremely divergent views, so I am watching indicators for the market reaction. The market looks stretched: The panic indicator gave a sell signal Wednesday; VIX is moving rapidly higher and Hindenburg Omens are occurring regularly. This market is breaking down and we may see an unusual December correction. It certainly isn’t a given though and I’ll also be watching for a turn-around opportunity to increase investments in stocks. Lower gas in the long run is very positive and I want to get longer if I can identify the right buying point. In the short run, we’ll have to keep watching.
As I noted elsewhere, the S&P 500 is still about 3% above its 200-dMA and we may see the markets move up from the 200-dMA.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) was 43% 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-308 . (It was -117 Thursday). The 10-day moving average of change in the spread was minus-45. In other words, over the last 10-days, on average, the spread has decreased by 45-each day.
Internals deteriorated and remained 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
The long-term NTSM system analysis remained HOLD Friday. The VIX indicator is positive; otherwise the NTSM would now be “sell.”
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 cut some stock investments today 11 Dec to take some profits and
offset them with losses as noted below.
I am probably now closer to 45% invested. ENSCO (ESV): SELL
I SOLD Ensco for tax-loss purposes along with some winners (SPY, INTC & others) Thursday. I can buy them back after the oil/market situation is clearer. Same for Ensco, but I’ll have to wait 30-days or lose the tax advantage of the sale. Kramer said on CNBC after the close last night (Thursday) that Ensco is the worst performing stock he has ever owned; Amen! I am embarrassed since it is one of the few individual stocks I have discussed in the blog.
