GREECE (CNBC)
“Greek Prime Minister Alexis Tsipras…blasted Athens' creditors, whom he accused of conspiring to "wipe out hope," and called for his country to vote "no" in the upcoming referendum.” Story at…
http://www.cnbc.com/id/102790605?trknav=homestack:topnews:2
My cmt: So he wants to create a crisis so Europe will bail them out. Hmmm. I wonder how that will play out.
PENDING HOME SALES (MarketWatch)
“Pending home sales in May rose to their highest level in over nine years, the National Association of Realtors said Monday. The pending home sales index rose 0.9% in May…” More at...
HUSSMAN EXCERPT (Hussman Funds)
“Investors don’t seem to appreciate what they’ve actually done as a result of the yield-seeking speculation encouraged by the Federal Reserve in recent years…investors have priced equities for zero returns over the coming decade, with the likelihood that by the end of the present market cycle, every bit of total return, every zig and zag of the market since 2000, will be wiped away for naught. Why? Because even the 4.1% annual total return in the S&P 500 since the 2000 market peak has been achieved only by driving market valuation to what is now the second-highest extreme in history, eclipsing every historical record except that 2000 peak, and beyond those of 1929, 1937, 1966, 1973, and 2007. How much of a market loss is needed to wipe away 15 years of 4.1% annual total returns? About 45%...” – John Hussman, PhD, Weekly Market Commentary from Hussman Funds.
http://www.hussmanfunds.com/wmc/wmc150629.htm
HIGH VOLUME FRIDAY
This past Friday saw extreme high volume, nearly twice normal. Turns out it was caused by Russell rebalancing. Russell Investments rebalanced their benchmarks. Indexes like the Russell 2000 were rebalanced to delete companies that no longer met the criteria for inclusion in the index and add companies that did.
THE BIG MOVE TODAY (Monday)…
…suggests that tomorrow is likely to be an up-day about 62% of the time based on statistical analysis of price-volume. There was strong late day selling so the Pros don’t like this market either. The move was so large that it triggered a panic indicator in my system. Usually, a large move like today that exceeds a standard deviation of “normal” moves by a large amount, suggests further down moves ahead, but there were other indicators that muddy the water.
-Low unchanged volume Monday suggests a bottom or bottom soon.
-Only 9% of stocks on the NYSE advanced Monday. Oddly, that can sometimes be a good signal to buy. It usually signals a flush-out of weak hands. With just one huge down-day under our belts, I wouldn’t be a buyer yet, except for perhaps a day-trade.
-As of Friday, less than half of all stocks on the NYSE are above their 200-day moving averages. That’s a bad sign and goes along with the 50-day moving average of stocks advancing on the NYSE reading of 46%. Anything below 50% is bad news.
TIMING THE CORRECTION
Greece is a problem for any market-timer. If their issues are worked out positively, the correction may end in a flash leaving the market-timer holding the bag. That’s what happened to me last October during the Ebola crisis. The market went down for 19-days before a quick rebound. The S&P 500 is already down 26-days since the prior high on 21 May although the “drop from the top” is now only 3.4% as of Monday. The average correction in the 8-20% range has taken about 50-days since 2010.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 46% at the close Monday. (A number below 50% is usually BAD news for the markets.
New-lows outpaced New-highs Monday. The spread (new-highs minus new-lows) was minus-310 (It was -113 Friday.) That too is a large number that hasn’t occurred since the lows last December and before that around the lows of Oct 2014.
The 10-day moving average of change in the spread fell to minus-24. In other words, over the last 10-days, on average; the spread has DECREASED by 24 each day. Internals remained negative on the markets.
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 2014, using these
internals alone would have made a 9% return vs. 13% 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, nearly straight-up year like 2014.
NTSM
Monday, the NTSM long-term analysis switched to SELL. PRICE (panic indicator) and VIX indicators flashed sell while; VOLUME and SENTIMENT indicators remained neutral.
MY INVESTED STOCK POSITION
I plan to cut my investments from 50% invested to 30% invested Tuesday unless the S&P 500 were to somehow close above 2100, an unlikely scenario.
Whether this will turn out to be a good move remains to be seen. I would warn readers that I have underperformed the S&P 500 in recent years so this may be another false alarm. It is doubtful that this is “the big one” that John Hussman and others have been warning about for several years, but there do seem to be several issues.
Greece isn’t the only problem; Puerto Rico‘s Governor said that they cannot pay their $72-billion debt either. There is likely to be continued worry over other European countries catching the “contagion”. Further, I currently am invested in Europe and it may not be the best time to be holding Euro-Pacific stocks and small-cap stocks will be more volatile than large-cap if this does turn ugly.
THRIFT SAVINGS PLAN (TSP) MEMBERS
My planned TSP Allocation: 70%-G; 30%-C. I will keep 30% invested since it assures I will have gains if the market goes up. On the other hand even in a worst case scenario I would only lose 15% in the unlikely event the market were to be cut in half.
