RSI, (SMA-14)
Relative Strength measures the size of up-moves vs. all-moves on a 14-day moving average basis and presents the result as a percentile. For example if the RSI is 85, it means that the size of up-moves are in the 85th percentile when compared to all moves over the 14-day period. If ALL moves had been up, RSI would be 100 – a definite short term sell indicator. For my purposes, 30 is oversold (suggesting a turn-around to the upside) and 80 is overbought. If the up-moves and down-moves are equal in size over the 14-day period, RSI would be 50.
RSI did make it to “Oversold” on Thursday of last week so the S&P 500 could be close to a bottom. (There’s no guarantee since RSI could remain oversold for a long time.)
MARKET REPORT/ANALYSIS
-Friday, the S&P 500 was up about 1.2% to 2077 at the close.
-VIX was down about 16% to 16.83.
-The yield on the 10-year Treasury was up to 2.42%.
The action in the VIX and 10-year on last Friday are suggesting the bottom was last Thursday.
NEWS DRIVEN. The markets continue to be news-driven studying Greece with a minor in Chinese-market-crash. I previously suggested that Greece would be impossible to trade since the markets were going to react to the Greek Tragedy and, without a crystal ball, the course of a correction would be unknown. That continues, but technically, indicators have improved, probably because investors anticipated a positive ending to the Greek drama. Whether they’ll be right remains to be seen.
BREADTH AND UP-VOLUME. The 50-dma of advancing stocks remained 47% Friday. (Below 50% is a bad for the stock markets.) In the last 10-days, 43% of the total volume on the NYSE has been up-volume. (That stat was 38% Thursday.) Both of these need to be above 50% to indicate a healthy market, but they are improving.
The percentage of stocks above their 200-day moving average bounced up to 43% Friday (data is a day late). This is still close to 2-standard deviations below norm and is not giving us too much confidence. At least it moved up, but not high enough to break out of its down-trend on the chart.
CONCLUSION
In the end, it comes down to Greece. Do you think they will manage to get a deal?
Here’s what the Washington Post said Sunday morning:
“The simple story is that Germany and the other hardline countries don't trust Greece's anti-austerity Syriza party to actually implement, well, austerity. And so rather than coughing up another 60 or 70 or 80 billion euros, they seem to want to push to kick Greece out of the common currency instead. That, at least, was the plan that leaked on Saturday. And now it's part of the actual plan on Sunday.” – Story at…
http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/12/germany-doesnt-want-to-save-greece-it-seems-to-want-to-humiliate-greece/
This story changes so much it is impossible to know what a final deal would look like or if it is possible to get one.
If there is a Greece deal tomorrow and markets are reacting positively: BUY!
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) climbed to 47% 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-15. (It was -79 Thursday.)
The 10-day moving average of change in the spread rose to +2 Thursday. In other words, over the last 10-days, on average; the spread has INCREASED by 2 each day.
Internals remained NEUTRAL 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
Friday, the NTSM long-term analysis is HOLD. VIX, SENTIMENT, VOLUME, and PRICE indicators are all 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’ll be a buyer if I see a decent technical signal or if there is a deal on Greece that is greeted positively by the markets. I’ll move to 50% invested in stocks. If there is a huge down day, I’ll reset some trading positions in UWM and IWM. Tech stocks may suffer from China issues so I am inclined to avoid tech right now.
