SENTIMENT
(Refer to the Sentiment discussion in my 2 July 2015 Blog in paragraph SENTIMENT.) Thursday at the close, Sentiment pulled back slightly to 84%, just below the sell point of 85%. (Sentiment numbers are usually a day late.) What is needed is a concerted pullback in the stock markets that would pull sentiment down. That would then create some room for the Index to move up and make new highs. As it stands now, sentiment is so high that it is more likely that the S&P 500 will remain flat or decline, rather than advance. I caution though, sentiment shouldn’t be used as a timing signal alone since it can remain elevated for long periods with little reaction in the markets.
(Refer to the Sentiment discussion in my 2 July 2015 Blog in paragraph SENTIMENT.) Thursday at the close, Sentiment pulled back slightly to 84%, just below the sell point of 85%. (Sentiment numbers are usually a day late.) What is needed is a concerted pullback in the stock markets that would pull sentiment down. That would then create some room for the Index to move up and make new highs. As it stands now, sentiment is so high that it is more likely that the S&P 500 will remain flat or decline, rather than advance. I caution though, sentiment shouldn’t be used as a timing signal alone since it can remain elevated for long periods with little reaction in the markets.
SENTIMENT SURVEYS PAY NO ATTENTION!
Here’s Charles Sizemore’s Tumblr blog. He says sentiment is near all-time lows based on an AII survey: “The AAII survey measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market for the next six months…bullishness is currently at lows you might normally associate with panic bottoms.” – Charles Sizemore. Blog at…
http://charlessizemore.tumblr.com/post/123391335391/aaii-sentiment-survey-running-of-the-bulls
Panic bottom? That’s the opposite of my analysis. That’s why I don’t pay any attention to “surveys”. While investors may say they are bearish, the Rydex/Guggenheim funds I track show how individual investors are actually positioned, now. I am very skeptical of surveys.
ISM SERVICES UP SLIGHTLY (CNBC)
“The pace of growth in the U.S. services ticked higher in June after dropping to a 13-month low in May, as reads on business activity and new orders improved, an industry report showed on Monday. The Institute for Supply Management said its services sector index increased to 56.0…” Story at…
http://www.cnbc.com/id/102811381
HUSSMAN COMMENTARY (Hussman Funds)
“’I know of no way of judging the future but by the past.’ – Patrick Henry
With valuations still extreme and deterioration in market
action continuing to indicate a shift toward risk-aversion among investors, we
are less concerned about specific factors such as Greece than about much more general
pressures that threaten to force an upward spike in compressed risk-premiums…In
short, it’s the deterioration in market internals and other risk-sensitive
factors, and emphatically not simply elevated valuations alone, that suggests a
much different and far more vulnerable environment here than we’ve observed for
the majority of the period since the 2009 low.” – John Hussman, Phd. Weekly
Market Commentary from Hussman Funds at…
http://www.hussmanfunds.com/wmc/wmc150706.htmCHINA FACING STOCK MARKET CRASH (YahooFinance)
“China's stock markets face a make-or-break week after officials rolled out an unprecedented series of steps at the weekend to prevent a full-blown stock market crash that would threaten the world's second-largest economy. The government is anxiously awaiting the market opening on Monday to see if the new measures will halt a 30 percent plunge in the last three weeks…” Story at…
http://finance.yahoo.com/news/chinese-officials-investors-hope-support-110047668.html?l=1
My cmt: China has become a large market for many US companies. I am confused why so many commentators ignore a Chinese stock crash that could well lead to a Chinese recession. This can’t be good for the world’s economy.
MARKET REPORT
-Monday, the S&P 500 was down 0.39% to 2069 at the close.
-VIX rose about 1% to 17.01.
-The yield on the 10-year Treasury dropped to 2.28%.
My expectation is that the S&P 500 will go lower from here, but not necessarily by a lot. I haven’t seen any positive indicators yet.
SOME CAUTIONARY THOUGHTS
-Sentiment is extreme.
-Market Internals remain negative.
-The 50-day value of stocks advancing on the NYSE dipped to 47%. Simply, that means that less than half of the stocks on the NYSE have been going up over the last 50-days. That is not a good sign. It hasn’t done that since last October’s 7% mini-correction.
-In a related stat, the percentage of stocks above their 200-day moving average remained 43% Thursday (data is a day late). This is 2-standard deviations below norm and is suggesting trouble.
-In the last 10-days, only 39% of the total volume on the NYSE has been up-volume. (That stat was 39% Thursday.)
-Statistical analysis had been indicating a possible top due to the small moves in price-volume when compared to the norm before the recent Greece crisis began.
SOME BULLISH THOUGHTS
-VIX has become reasonably well behaved after initially seeing a huge rise, so it is not at all clear that there will be much of a correction.
-There was reasonably strong late-day buying Monday.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks
advancing (NYSE) slipped to 44% 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-173. (It was -62 Thursday.)
The 10-day moving average of change in the spread dropped to minus-20. In other words, over the last 10-days, on average; the spread has DECREASED by 20 each day.
Internals remained negative on the markets.
NTSM
Monday, the NTSM long-term analysis is HOLD. SENTIMENT is negative, but only because the sell signal from 2-days ago is held for 5-days. PRICE, VIX, and VOLUME indicators are neutral.
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.
