“The twin fears of China and Greece will hang over markets Thursday with China increasingly the bigger concern. ‘There's definitely an issue if we see a further correction in the Chinese stock market,’ said Russ Koesterich, BlackRock's chief investment strategist.” Story at…
http://www.cnbc.com/id/102819224
As I suggested a few days ago, China is overtaking Greece as a concern. I saw a piece that said China was providing margin money (at no or low interest rates) so that traders/investors would buy and drive up Chinese stock prices. That can’t work forever and will also exacerbate the final crash. Markets are down about 32% as of Wednesday. As of 10:15 PM Wednesday it looks like the Shanghai is down about 0.7%.
FOMC MINUTES SHOW CAUTION (Foxbusiness.com)
“Most members of the Federal Reserve’s policy-setting committee agree that the economy is rebounding from a weak first quarter, but more proof is needed that the recovery will grow and maintain upward momentum before a decision can be made on raising interest rates.” Story at…
http://www.foxbusiness.com/economy-policy/2015/07/08/fomc-minutes-show-abundance-caution-toward-rate-hike/
CRUDE INVENTORIES (24/7 Wall Street)
“The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories increased by 400,000 barrels last week, maintaining a total U.S. commercial crude inventory of 465.8 million barrels. The commercial crude inventory remains near levels not seen at this time of year in at least the past 80 years.” Story at…http://247wallst.com/energy-economy/2015/07/08/crude-oil-price-dives-after-inventory-posts-surprise-rise/
NYSE TRADING HALT (Marketwatch)
“The New York Stock Exchange ‘temporarily suspended trading in all symbols,’ [for about 3-hours] which captured imaginations and had investors worried about everything from severe fallout from the recent China meltdown to the potential for some sort of hacker attack or terrorist situation. Within an hour, sources were suggesting the issue had more to do with computer glitches than some major event...” Story at…
http://www.marketwatch.com/story/nyse-outage-is-a-black-squirrel-event-2015-07-08?mod=MW_story_recommended_default&Link=obnetwork
MARKET REPORT
-Tuesday, the S&P 500 was down 1.7% to 2047 at the close.
-VIX was up about 22% to 19.66.
-The yield on the 10-year Treasury dropped to 2.21%.
Wednesday, the S&P 500 closed about 0.4% below the 200-dMA and made a lower low when compared to 29 June.
Volume on the NYSE was impossibly low due, no doubt, to the shut-down of trading for 3-hours due to computer problems. I’d like to see a lower low (vs 29 June) on lower volume, but the NYSE volume data is screwed so I switched to the volume traded in the S&P 500. The S&P 500 volume was only slightly lower than the volume on 29 June so it is not clear that tomorrow is a buying opportunity. (This data was probably artificially low too.) If there are significant improvements in internals tomorrow, perhaps there will be enough evidence to call a BUY. (As a side note, this data glitch may send the Wall Street computers into a major buy mode since volume collapsed on a lower low suggesting selling is over. I am not so sure. There isn’t much evidence for that yet since there was significant late day selling Wednesday.)
The 50-dma of advancing stocks remained 47%, (Below 50% is a bad for the stock markets.) In the last 10-days, only 33% of the total volume on the NYSE has been up-volume. (That stat was 39% Monday.) Both of these need to be above 50% to indicate a healthy market. Today, only 6% of volume was up and that contributed to an exaggerated TRIN.
TRIN SUGGESTS OPTIMISM. TRIN, the trader’s Index, is an equation that relates up/down volume and advancers/decliners. Today’s TRIN of 3.2 is very high and is bullish. Spikes this high often are associated with bottoms. The question becomes: “Is this a bottom?” As of Wednesday, the S&P 500 is only down 3.9% from its all-time high – this doesn’t look like a bottom to me, just more worry. I could be wrong on this one. In the end, where the markets go may depend on this question: “How will those Wall St computers interpret with the screwed up data?"
The percentage of stocks above their 200-day moving average climbed to 44% Tuesday (data is a day late). This is still about 2-standard deviations below norm and is suggesting trouble, but at least it was up. Since the Index was up Tuesday too, it doesn’t give us too much new information.
RSI is not yet oversold; this suggests the S&P 500 Index may have a further to fall.
CONCLUSION
The markets may be close to a bottom; may bottom tomorrow; or may have bottomed today...or none of the above. Tomorrow will give some further clues. Sorry, the tea leaves are not too clear to me. Actually, my guess is the markets will move lower so I am not adding to my position in stocks yet.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dropped to 40% at the close Wednesday. (A number below 50% is usually BAD news for the markets.
New-lows outpaced New-highs Wednesday. The spread (new-highs minus new-lows) was minus-160. (It was -252 Tuesday.) This is a reasonable turnaround, but not big enough to warrant suggesting that the “correction” is over.
The 10-day moving average of change in the spread rose to minus-26. In other words, over the last 10-days, on average; the spread has DECREASED by 26 each day.
Internals remained negative on the markets continuing to suggest further trouble. Perhaps this will be a low to be retested later? It’s hard to say since the news is getting to the markets. Perhaps I’ll become more bullish if the Market Internals reverse to the upside.
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
Wednesday, the NTSM long-term analysis is SELL. SENTIMENT is negative, but only because the sell signal from 4-days ago is held for 5-days. The VIX indicator switched to negative Wednesday, based on the huge VIX rise. VIX is the most reliable indicator in my system. VOLUME switched to negative. VOLUME is a variant of on-balance-volume. The PRICE indicator is neutral.
MY INVESTED STOCK POSITION
On 30 June, I cut my investments from 50% invested to 30%
invested in stocks, all in an S&P 500 index due to my SELL signal the day
before. I am keeping 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.
THRIFT SAVINGS PLAN (TSP) MEMBERS
My TSP Allocation: 70%-G; 30%-C.
